Illiquid private assets strain ETF structures
The guest argued that putting highly illiquid private equity and private credit assets into the daily-liquid ETF wrapper creates structural friction and potential pricing disconnects.
The argument
While there is strong investor demand to access private assets (like SpaceX or Anthropic) via ETFs, the guest argued these assets are structurally better suited for closed-end or interval funds. He noted that during periods of market stress, ETFs holding illiquid assets will trade at massive discounts to NAV to reflect true market bids.
The thesis, stress-tested
✓ What validates it
- ✓SEC regulatory actions or guidance regarding private asset exposure in retail ETF wrappers
- ✓Widening discounts to NAV in ETFs that attempt to package private credit or venture-backed companies
▸ Risks discussed
- ▸ETFs holding illiquid assets can trade at severe discounts to NAV during market panics
- ▸Regulatory limits on illiquid holdings can be stretched or self-certified by managers
Hear it yourself
"I would say, related to all this is, like, there's a lot of push from different issuers and, honestly, from investors to take private assets, whether it's private equity, private credit, and put them into the ETF wrapper, which is something we've been talking about a lot on our team."
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