The United Food and Commercial Workers International Union (UFCW) has written to the Securities and Exchange Commission (SEC) raising concerns about a new type of exchange-traded fund (ETF) that will invest in private credit instruments sourced by Apollo Global Management (“Apollo”). In September 2024, State Street Corporation (“State Street”) filed a registration statement for SPDR SSGA Apollo IG Public & Private Credit ETF (“Apollo ETF”)¹, that it expects to become effective this Friday, December 20, 2024.

The Apollo ETF would expose public investors to Apollo-originated private credit investments, a type of debt investment that is generally considered illiquid and would be new to exchange-traded funds.

UFCW raised the following main concerns in its letter to the SEC:

1. The proposed Apollo ETF could violate SEC’s liquidity risk management rule² that restricts the amount of illiquid assets ETFs can hold to 15% of fund assets.
2. State Street and Apollo have a longstanding relationship that could pose potential conflicts of interest and as of yet has not been disclosed in the registration statement. The relationship includes State Street being a large shareholder of Apollo, serving as a custodian of an Apollo subsidiary’s assets, and recommending Apollo’s insurance company to pension fiduciaries in at least 7 pension risk transfer deals worth $30 billion.
3. Apollo has potential conflicts of interests within its own businesses which appear not to have been disclosed in the registration statement, as different Apollo companies originate, buy, sell and invest in Apollo-originated private credit assets.
4. Apollo is not designated as a sub-adviser to the Apollo ETF, appearing to limit Apollo’s fiduciary duty to the fund or its investors.

In addition to the SEC, UFCW has shared these concerns directly with State Street as sponsor of the Apollo ETF.

To read more, the letter can be viewed here.

¹ Form N-1A, SSGA Active Trust, Securities Act File No. 333-173276, Investment Company Act of 1940 File No. 811-22542, September 10, 2024, https://www.sec.gov/Archives/edgar/data/1516212/000119312524216340/d878371d485apos.htm

² SEC Final Rule, Investment Company Liquidity Risk Management Programs, Release Nos. 33- 10233; IC- 32315; File No. S7-16-15, October 13, 2016, https://www.sec.gov/files/rules/final/2016/33-10233.pdf

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The Apollo ETF would expose public investors to Apollo-originated private credit investments, a type of debt investment that is generally considered illiquid and would be new to exchange-traded funds.