BlackRock has identified significant structural and operational challenges in creating a 100% private credit exchange-traded fund, citing liquidity constraints and valuation complexities. The firm emphasizes that such a product would face substantial hurdles despite rising investor demand for private credit exposure.
- BlackRock identifies liquidity and valuation challenges as primary barriers to a 100% private credit ETF
- Global private credit market size reached $2.1 trillion in 2024
- Private credit investments typically have five- to seven-year lock-up periods
- ETF structures require daily pricing and redemption capabilities, which conflict with private credit’s illiquidity
- Current ETFs offering private credit exposure use indirect vehicles like CLOs or debt securities
- Full private credit ETFs would require advanced valuation systems and capital buffers to manage risk
BlackRock has signaled that constructing a dedicated exchange-traded fund (ETF) fully invested in private credit would be exceptionally difficult due to the asset class’s inherent characteristics. Unlike publicly traded securities, private credit instruments are not regularly priced or easily transferable, presenting major obstacles to ETF creation and daily trading. The firm highlighted that the lack of standardized valuation methodologies and infrequent trading activity in private credit markets undermine the transparency and efficiency required for ETF structures. Private credit, which includes loans to non-public companies and leveraged buyouts, has grown rapidly, with global outstanding volumes estimated at $2.1 trillion as of late 2024. Despite this expansion, the asset class remains illiquid, with many investments locked in five- to seven-year terms. BlackRock noted that even partial exposure to private credit in ETFs—such as through collateralized loan obligations (CLOs) or debt-backed securities—requires careful structuring to avoid mispricing and investor risk. The firm cited internal assessments indicating that replicating a true 100% private credit ETF would require unprecedented levels of portfolio transparency, robust third-party valuation systems, and capital buffers to manage redemption pressures. Without these mechanisms, such a fund could face significant tracking errors and concentration risks. This analysis comes as several asset managers have explored hybrid private credit ETFs, but none have yet launched a fully concentrated version. Market participants, including institutional investors and wealth managers, are closely watching BlackRock’s stance, as the firm's views often shape industry standards. The challenges raised may delay or alter the development of new ETF products in this space, ultimately limiting retail and institutional access to private credit.