Fears of a private credit crisis are rising as firms at the heart of the growing, but less liquid and less transparent, bond market face investor redemptions. That stress test has arrived just as private loans became more prevalent in the ETF market. It was a little over a year ago that the Securities and Exchange Commission approved the first ETF branded as a private credit fund.
For ETF investors, the good news it that the risks represented by the asset class are showing up in a more controlled way, as ETFs invest directly in private credit issues are still limited in how much exposure they can have to the asset class — up to, but not exceeding 35%.
Some other, older ETF products that are tied to private credit get indirect exposure only, according to Todd Rosenbluth, head of research at VettaFi, said on CNBC’s “ETF Edge. They use vehicles like business development companies and closed end funds that primarily invest in the private credit sector. While that adds liquidity compared to holding private loans directly, it is not without investor concern in the current environment.
The VanEck BDC Income ETF (BIZD), which has roughly $1.5 billion in assets and dates back to 2013, is down 13% since the start of the year. The reason is clear: among BIZD’s top holdings are publicly traded shares of some of the private credit managers in the news, including Blue Owl Capital and Ares Capital. Blue Owl shares are down over 46% this year.
The Simplify VettaFi Private Credit Strategy ETF (PCR) is down around 20% in the past year and also focused its investments in business development companies and closed end funds.
PCR YTD
Liquidity remains the main concern for investors, and private credit is not meant for daily trading the way ETFs are, which has resulted in issues between private credit managers and investors wanting to pull out their funds. But in the ETF space, daily liquidity and trading always give investors the option to sell, though it may come at a cost.
“You can get out, you’re just going to pay or you’re going to sell at a discount to net asset value,” Rosenbluth said.
BIZD closed at a discount to its net asset value 37 times in calendar year 2025, and so far, 12 times this year.
Private credit funds, meanwhile, often restrict withdrawals during times of stress. “You’re gating because you said we can’t have a run on the bank,” Rosenbluth said.
Limits on redemptions help prevent forced selling and instability, though they don’t necessarily help to calm market fears.
State Street‘s private credit ETFs, developed with alternative investments manager Apollo Global and which included the first private credit branded ETF approved by the SEC, are examples of how access is being structured within ETFs. The State Street IG Public & Private Credit ETF (PRIV) was the first of its kind, approved by the SEC in February 2025. The State Street Short Duration IG Public & Private Credit ETF (PRSD) launched later in 2025.
These funds are meant to outperform standard bond benchmarks by including investment-grade private credit, and can both hold as much as 35% in private credit issues, or at times less than 10%. According to the State Street ETF web site, only one of PRIV’s current top 10 holdings is private credit, with treasury and mortgage-backed securities dominating in the top 10. PRSD’s top holdings are a mix of government, mortgage and currency holdings.
Performance of State Street’s private credit ETF, the first approved by the SEC, over the past year versus the aggregate bond index.
PRIV has $831 million assets under management; PRSD is much smaller, at $48 million in assets under management. Both have seen relatively flat performance since the beginning of the year. Both PRIV and PRSD hold slightly over 20% of assets in Apollo-sourced investments, according to State Street data.
Jeffrey Rosenberg, systematic fixed income senior portfolio manager at BlackRock, who runs a long-short strategy in an ETF wrapper, says private credit investing issues are one example of how much ETFs have changed fixed income markets. As active portfolio managers in the bond market meet more investors through ETFs, it allows them more precision in targeting specific parts of the credit market. “They’ve just completely changed how liquidity provisioning, price discovery … how the ecosystem of credit market-making functions in a modern credit market,” he said on “ETF Edge.”
Money has been on the move during the recent market volatility, according to VettaFi’s Rosenbluth, with ETF investors “taking some risk off” and moving from longer-duration bond funds into shorter-duration funds.
The biggest systemic risk in private credit markets comes from the asset-liability mismatch. “The run on the bank,” BlackRock’s Rosenberg said. But it is his view that this type of risk is less pronounced today since many private credit vehicles limit liquidity by design. That cannot eliminate risk, but can make the risks surface more gradually, Rosenberg explained, saying impact could take place over longer time horizons as companies face refinancing at higher rates.
Both Rosenbluth and Rosenberg explained that the result of this is a system that absorbs shock differently. Private credit funds may restrict redemptions and ETFs allow for continuous trading with real-time price adjustments — allowing markets to keep functioning while reflecting stress as it develops. Both approaches, they say, aim to prevent disorderly outcomes.
CORRECTION: This article has been updated to correct the spelling of Jeffrey Rosenberg’s name.
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