Private credit meltdown fears: Why BondBloxx isn’t worried

BondBloxx ETFs has been making a significant investment in private credit, despite concerns on Wall Street about a potential meltdown in the space. Joanna Gallegos, the firm’s co-founder and chief operating officer, believes that private credit is a wise choice for investors looking to generate income.

In a recent interview on CNBC’s “ETF Edge,” Gallegos addressed the fears surrounding private credit, stating that occasional markdowns of a manager’s assets are to be expected. However, she emphasized that BondBloxx’s approach to private credit offers investors a high level of diversification and protection. The BondBloxx Private Credit CLO ETF, launched in December 2024, provides exposure to over 7,000 loans, with 80% of the fund dedicated to private credit.

Gallegos highlighted the attractive yield potential of private credit, noting that an increasing number of companies are choosing to remain private. She stressed that the fund’s strategy of spreading exposure across multiple loans and managers reduces the reliance on a single manager or credit pool.

Todd Sohn, senior ETF and technical strategist at Strategas Securities, echoed Gallegos’ sentiments, stating that credit spreads remain low across high yield and investment grade markets. While he does not currently see widespread stress in credit markets, he acknowledged the possibility of a “credit event” that could impact the financial system.

Sohn emphasized the importance of monitoring the private credit market for any signs of distress that could spill over into other areas of the financial system. Despite the overall stability of banks and consumers, he cautioned against complacency and urged vigilance in identifying potential risks.

In conclusion, BondBloxx ETFs’ focus on private credit offers investors a unique opportunity to access this asset class through a diversified and innovative ETF. With a strong track record of performance and a commitment to risk management, the firm is well-positioned to navigate the complexities of the private credit market and deliver value to investors.