Bloomberg Audio Studios, podcasts, radio news. Let's go now to the intersection of public and private markets. About two weeks ago, State Street and Apollo launched a new kind of ETF, granting access to private assets in the public market. Within hours of the launch of priv the SEC sent both firms a strongly worded letter listing multiple concerns. For more on that, we're pleased to say. Annapaglia joins us now.
She is the executive vice president and chief business officer at State Street Global Advisors, that is one of the firms behind the new ETF. I'm also joined by my ETF IQ co host, Katie Greeifeld.
Katie, great to see.
You both, especially not on a Thursday. Usually we talk on Mondays. So Trina also, great to see you in studio with us. And I want to start with the SEC because it was really unusual to see the SEC send this letter post launch, really specifically laying out their concerns. What did your conversations look like with the SEC pre launch. I think there's a lot of confusion about how this happens, and I'm just wondering if you discuss these issues with the agency prior to actually trading beginning.
Sure, Katie.
First of all, thank you for having me, and I know that this is the hot topic of the day or the last couple of weeks, so I'm really happy to have this conversation with you today. Let's put that into perspective, because it is true that we get additional comments from the SEC after we launch the fund, but I would also say that this is not a unique
I mean, it happens from time to time. This fund that had been in registration for five months, so if you compare that to a traditional fund launch that takes usually seventy five days, that will tell you that we have had a very healthy dialogue with the SEC. Four rounds of comments and we answered those comments.
And then the way.
Are some lingering ones without the process have concluded it had not. We got the new comments and we answered those within twenty four hours.
So in the last couple of weeks.
I think that's more drama than it was warranted was created in the market. And I have read so much stuff that I think it's worthwhile trying to distinguish facts from fiction. So the one thing that I've been reading is, you know, this fund that may not be fully operated in compliance with the forty Act.
I mean that's fiction.
This fund is being managed, administered, operated in full compliance.
With the forty Act. That's a fact.
Interesting, then I have also read something to the effect that we have not fully addressed the comments from the SEC. There was a line around when is the next shoe gonna drop? Now I know a thing of two about shoes, and I can tell you that that's fiction.
There are no other shoes to drop.
And as you can see on Edgar, even the correspondence of the secs so that the stuff has no additional comments.
That's a fact.
So given that, and given that you were having these conversations with the SEC leading up to launch and the fund did go effective, were you surprised to see this letter? Certainly from where I was sitting at my desk in the newsroom, I was surprised to see it.
So I was surprised and not surprised, because again, this construct is novel, and it's not the first time that the SEC gives you comments after a registration statement is effective.
So now it was unfortunate because it was made up very public in a fund that had been you know, in registration for five months, and where the flash lights were but to me, that is part of a dialogue with the SEC now was that ideal was not ideal, But the fact that we addressed it within twenty four hours tells you the health of the conversation and the dialogue that we had with the stuff and with the omission over the prior months.
Thank you for sharing all of that. The other thing we can't help noticing is that this ETF was launched during a shift change at the SEC. Gary Ginster has gone, Paul Ekins has not yet been confirmed. There's an interim chair. Do you think that that impacted this whole process for you?
I wouldn't say.
I wouldn't say that it is because I have been working with the SEC, with the staff for almost two decades now and I have the highest respect for the staff. And even if the chairs and the leadership is changing, there are some very incredible experts of Fortiact EXPERSUS securities experts at the SEC that are not changing with the administration. So I don't think. I don't think that the change in administration and an impact. And whether this funder went to market or.
Not, yeah, it's a good reminder it's not just the guy at the top. You know, there's all these teams within the agency as well. So this obviously, like you mentioned, has been a hot topic. I have a podcast with Matt Levine called Money Stuff, and we've been talking about it on that podcast, and we had actually a listener right in basically asking about the relationship with Apollo. They asked, with the advent of a private credit ETF, isn't adverse selection an inherent issues?
So I'm wondering.
Whether State Street has the expertise in house to evaluate what Apollo is putting into the ETF.
We do.
We do have the expertise in house. Not only did we have the expertise in house when thinking about the h this fund and how to structure this fund, but we also made the new hire set to make sure that we had the right talent in seats. In the end, s SGA is the UH is the advisor. By design. We wanted us to be in a position to make selections and have investment discretion on what task sets to take or not to take from Apollo, and that type of expertise was critical.
And you mentioned, you know, it was unfortunate that this letter came after the ETF had already launched it. It's out in the public like that, and I want to bring that conversation to flows that have come into the ETF. This is a first of its kind ETF, so there's typically a way and c sort of period. But it's only taken in two days of net inflows since it's launched. Told me about five million dollars in assets so far. Do you think that that overhang is impacting muting flows to any extent.
It's funny you say that, because in this cases, success is in the eyes of the beholder. If I look at if I look at the treading volume, so I separate the trading volume of from flows. Treading volume for this fund that's been incredibly healthy. Let's remember it's an active ETF. And if you look at all the other active funds or even the wider ETF universe, all new funds have registered are roughly an average of four million
dollars a day of treading volume. This fund that has been an on par with the average, and at times it has even been healthier than the average. And the first ding, the first day it registered, the five million dollars of trading volume, and we got to to creates in the first two trading days, which you know, it may sound like only two, but it's very unusual for a new active fund that to ever creates in the
first week. I mean with active strategies. As you may appreciate, people wait for the fund to create a little bit of a performance record, the trading record.
So everything we see in.
Market the first of all, is not unexpected, is actually better than we anticipated. So we are really pleased with the trading volume and the attention that we are getting from investors.
And making private assets were widely accessible to investors has long been a goal, not just for you, but for others. The challenge was always how to do it. At investment firms like Blue Owl and Blackstone, some are choosing to do it as interval funds, which would allow investors to cash out during certain periods. Was that ever under consideration for the private funds that you did launch.
It was everything was on the consideration. Everything is on the table. We like to think of ourselves as a rap pagnostic firm. We always look at the best exposure.
But you're the og ETF firm.
We are the OGETF forum.
But we do have target data funds, we have index mutual funds and other mutual funds, So there are different ways to repackage the content, and for us at democratizing a private assets was paramount and this is why we said that let's let's be very creative and see if there is a way to incorporate this as a class into ETFs.
So this launch was interesting from so many different levels. But one of those levels was State Street's partnership strategy. Because you have this partnership with Apollo, you have a partnership with Galaxy for example, you have a partnership with Bridgewater, and actually you just launched this all weather ETF last week, which was really interesting to see. So private credit is one thing, but when it comes to crypto and when it comes to sort of risk parity strategies, theoretically State
Street could have done that in house. So talk us through what the benefit of pursuing these really high profile partnerships is.
Oh absolutely to us.
You know, brand matters because branded recognition is earned, is not given, and the branded recognition really means that you are an expert at something. And if we look at our brand, Ssgas brand is a market leader in ETFs. You know, we created the market with spy. We opened the ETF market to the masses. This is what we are good at understanding the entire ecosystem. But when we want to build other strategies and bring them to clients, we always look at who is the best.
In class and those strategies.
Could we have done digital assets, absolutely, but we are not a cryptonative. That's why we partnered with a crypto native. Could we have done risk aparity, absolutely, we would have done it, but we partnered with those who started that business that strategy with decades of experience the goods of risk parity risk parity strategies. So for us, bringing together what we do best with what other firms do best allows us to bring these best in class solution to clients.
We have thirty seconds if that. When it comes to partnerships, are you pursuing any others? Should we be keeping an eye out?
You should?
You should be keeping an eye out of our new partnerships and more with existing partnerships, because the partnership is not transactional. It's what we can do together the entire universal possibilities.
All right.
So it's just the beginning of these partnerships. And and I really appreciate your joining us on a paglia from Stagy Global Advisors