VanEck is launching Australia’s first global listed private credit ETF on Friday, 2 February, which will give investors access to the “booming” private credit market that surged to US$1.6 trillion in 2023.
The asset class, VanEck noted, has historically been the “domain” of institutional and high-net-worth investors who have the capacity to invest with limited liquidity and price discovery.
The VanEck Global Listed Private Credit (AUD Hedged) ETF (ASX: LEND) will track the LPX Listed Private Credit AUD Hedged Index (LEND Index), which includes 25 global listed private credit companies.
Commenting on the announcement, VanEck Asia-Pacific chief executive officer and managing director, Arian Neiron, said that growth in the private credit segment is an “unparalleled global phenomenon”.
“We’re seeing private credit increasingly taking over the core business of traditional banks, that is, the provision of debt capital to medium-sized companies and real estate. Australian investors will now be able to access this growing opportunity via an ETF on ASX,” Mr Neiron said.
“We’re seeing immense interest in this investment strategy which outstripped all other major asset classes in 2023 from an income perspective, with the LEND Index yielding over 10 per cent.”
According to the firm, the income yield of the LEND index has averaged around 8.6 per cent per annum.
Mr Neiron added that the potential higher-for-longer rates also bodes well for the asset class, offering investors interest rate protection should inflation persist.
“With LEND, all types of investors get to reap the potential rewards from private credit, while also getting all the benefits that an ETF provides, including ease of access, transparency, liquidity, and a diversified exposure,” Mr Neiron added.
“Importantly, to date, Australian investors have taken manager, borrower, and sector concentration bets when investing in private credit.”
Namely, the majority of private credit in Australia is targeted towards real estate, whereas the LEND Index has exposure to over 3,950 loans diversified across 25 private credit managers globally.
“Furthermore, with LEND, investors in private credit now have a price discovery mechanism for an asset class that has been accused of ‘volatility laundering’,” Mr Neiron concluded.
According to VanEck, the launch of LEND brings the firm’s total number of ETFs on the ASX to 40.