Private credit has emerged as one of the fastest-growing segments in fixed income, with institutional investors allocating heavily to the space. Yet, for financial advisors and individual investors, access to private credit has remained limited—until now. BondBloxx’s latest ETF, the BondBloxx Private Credit CLO ETF (ticker: PCMM), aims to bridge this gap by providing exposure to private credit through a cost effective vehicle.
In an interview with The Wealth Advisor’s Scott Martin, Leland Clemons, founder and CEO of BondBloxx, discussed how PCMM fits into the firm’s broader fixed income strategy and why it’s a valuable tool for modern portfolio construction.
Bringing Private Credit to Advisors
BondBloxx has built its reputation on offering targeted fixed income ETFs that go beyond traditional treasury and corporate bond exposures. PCMM is the latest step in that evolution, addressing growing demand from advisors for access to private credit.
According to Clemons, advisor feedback has consistently pointed to private credit as a crucial missing piece in their fixed income toolkit, leading to BondBloxx to launch an ETF solution for a segment of the market that was previously difficult to access.
“I’m proud of the team’s commitment to innovation and that we’ve actually been able to deliver things that haven’t been done before—and private credit’s really exciting,” Clemons says.
The private credit market is valued at nearly $30 trillion, fueled in part by the declining number of publicly traded companies. As more firms have chosen to remain private to avoid the costs of going public, investment opportunities for advisors have shrunk. Until recently, private credit investments were limited to institutional investors.
PCMM opens up private credit markets to a broader investor base through exposure to debt instruments that largely consist of pooled loans to private companies. These loans are managed by industry leaders such as Blackstone, Bain Capital, and Ares.
How PCMM Works
PCMM primarily invests in collateralized loan obligations (CLOs) of middle market loans. This structure offers diversification benefits, compelling yields, and more liquidity compared to selecting individual private credit loans.
“One of the key advantages of PCMM is that, in addition to gaining exposure to private credit through CLOs, investors benefit from a diversified portfolio of CLOs,” Clemons says. “So, you’re not buying one CLO but rather multiple CLOs that are managed and underwritten by different sponsors.”
Historically, access to private credit has been limited to interval funds or other vehicles with high fees and limited liquidity. PCMM’s construction simplifies access to private credit markets, which is typically difficult for individual investors to gain. “With the ETF wrapper, investors can now buy or sell on a daily basis, and at that intersection, there is a lot of value,” Clemons notes.
Cost Efficiency and Yield Potential
PCMM stands out for providing direct private credit access at a 0.68% expense ratio. Private credit investments often come with high fees, making them less attractive to cost-conscious investors.
“We’ve priced PCMM at a pretty significant discount to the average because we believe that as the product grows, we’re preemptively passing on the benefits of scale to prospective investors. As is the case throughout the fixed income product universe, the market’s evolved. Fixed income is more efficient today than it’s ever been, and that pricing efficiency should be shared with investors,” Clemons explains.
PCMM recently paid its first distribution, delivering an 8.72% distribution yield and a 7.44% 30-Day SEC yield, positioning it as a potentially strong alternative for investors seeking higher yields in a diversified fixed income portfolio.
“Yield is a crucial attribute of the product, reinforcing the various ways PCMM can be integrated alongside other equity and fixed income products within a broader portfolio,” Clemons says.
The combination of competitive pricing and attractive yield might make PCMM a compelling option for advisors seeking to optimize their clients’ fixed income allocations without sacrificing returns or incurring excessive costs.
Where PCMM Fits in a Portfolio
As a complement to traditional bond allocations, PCMM seeks to help advisors address the yield challenge that many fixed income portfolios face in today’s market. Its low correlation to both equities and traditional corporate bonds provides diversification benefits while potentially improving overall portfolio yield.
For advisors already using private credit strategies through interval or other less liquid funds, PCMM offers enhanced liquidity through its CLO exposure and ETF structure. The ability to allocate a portion of private credit exposure into an ETF can help advisors preserve portfolio liquidity while still capitalizing on private credit’s yield premium.
Within alternative allocations, PCMM provides a unique exposure that bridges the gap between traditional fixed income and private markets. Its ETF structure offers the transparency and liquidity that many alternatives lack, while still providing access to the private credit premium.
PCMM’s ability to serve multiple roles in a portfolio makes it an attractive option for advisors seeking to modernize fixed income allocations while maintaining efficiency and liquidity.
The Future of Private Credit in ETFs
The launch of PCMM marks a significant step in the evolution of fixed income ETFs. Over time, ETFs have successfully brought liquidity and accessibility to asset classes once thought too complex or illiquid. Just as ETFs have transformed access to municipal bonds and high yield credit, PCMM represents the next innovation in fixed income.
Advisors looking to enhance yield, improve portfolio diversification, and access private credit with liquidity, might find that PCMM presents a compelling opportunity. BondBloxx’s approach to slicing the fixed income universe into innovative, targeted exposures continues to bring new possibilities to investors.
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Important Disclosures
Carefully consider the Funds’ investment objectives, risks, charges, and expenses before investing. This and other information can be found in the Funds’ prospectus or, if available, the summary prospectus, which may be obtained by visiting bondbloxxetf.com. Read the prospectus carefully before investing.
Past performance is not a guarantee of future results.
There are risks associated with investing, including possible loss of principal. Fixed income investments are subject to interest rate risk; their value will normally decline as interest rates rise. Fixed income investments are also subject to credit risk, the risk that the issuer of a bond will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline. Securities that are rated below investment-grade (sometimes referred to as “junk bonds”) be deemed speculative, may involve greater levels of risk than higher-rated securities of similar maturity and may be more likely to default. Investing in mortgage- and asset-backed securities involves interest rate, credit, valuation, extension and liquidity risks and the risk that payments on the underlying assets are delayed, prepaid, subordinated or defaulted on.
Nothing contained in this presentation constitutes investment, legal, tax, accounting, regulatory, or other advice. Information contained in this presentation does not constitute an offer to sell or a solicitation of an offer to buy any shares of any BondBloxx ETFs. The investments and strategies discussed may not be suitable for all investors and are not obligations of BondBloxx.
The Fund is a newly organized, actively managed exchange-traded fund (“ETF”) that does not seek to replicate the performance of a specified index. The Fund invests, under normal circumstances, at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in private credit collateralized loan obligations (“CLOs”), which are CLOs in which the majority of each such CLO consists of a pool of loans to private companies (“private credit CLOs,” also commonly known as “middle market CLOs”).
A CLO is a type of asset-backed security supported by interest and principal payments generated from a pool of loans, which may include, among others, U.S. and non-U.S. senior secured loans and subordinated corporate loans and privately placed loans. The term “private credit” refers to lending activity that occurs outside of the broadly syndicated loan markets in which the banks and other traditional lenders place an issuer’s debt obligations across a wide range of investors.
The risks of investing in CLOs include both the economic risks of the underlying loans combined with the risks associated with the CLO structure governing the priority of payments. The degree of such risk will generally correspond to the specific tranche in which the Fund is invested. The Fund intends to invest primarily in investment grade rated private credit CLOs; however, any such ratings do not constitute a guarantee, may be downgraded, and in stressed market environments it is possible that even investment grade rated CLO tranches could experience losses due to actual defaults, increased sensitivity to defaults due to collateral default and the disappearance of the subordinated/equity tranches, market anticipation of defaults, as well as negative market sentiment with respect to CLO securities as an asset class.
The Sub-Adviser may not be able to accurately predict how specific CLOs or the portfolio of underlying loans for such CLOs will react to changes or stresses in the market, including changes in interest rates. The most common risks associated with investing in CLOs are liquidity risk, interest rate risk, credit risk, prepayment risk, and the risk of default of the underlying asset, among others. These risks may be heightened for private credit CLOs, as the portfolios of underlying loans for such CLOs are typically smaller than those of broadly syndicated loan CLOs, and as such, private credit CLOs may not have the same access to the capital markets to potentially mitigate and/or diversify such risks.
Investment in middle market companies involves a number of significant risks. Generally, limited public information exists about these companies, and the Fund is required to rely on the ability of the Sub-Adviser’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If the Sub-Adviser is unable to uncover all material information about these companies, it may not be able to make a fully informed investment decision, and the Fund may lose money on is investments.
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