Emile Hallez
2 min read
In This Article:
WisdomTree is adding blockchain to the growing world of private credit funds.
The company filed with the Securities and Exchange Commission last week for the latest flavor of private credit exposure in the form of a mutual fund. The nuance of the proposed product, compared with the few Investment Company Act of 1940 private credit funds out there, is tokenization — it would be part of WisdomTree’s digital trust. Shareholders would need to have digital wallets, such as one provided by WisdomTree, in order to invest. The product, WisdomTree Private Credit and Alternative Income Digital Fund, would be passively managed, investing in registered closed-end companies and real estate investment trusts.
“Because private investments have surged in popularity recently, it makes sense that more retail investors are interested in accessing the space,” said Roxanna Islam, head of sector and industry research at TMX VettaFi. “And generally, retail investors are more comfortable with open-ended funds like ETFs and mutual funds.”
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WisdomTree, whose business is rooted in exchange-traded funds and which launched its digital trust in 2022, has the majority of its $84 billion in US-listed fund assets in ETFs. Products like the recently launched SPDR SSGA IG Public & Private Credit ETF and the ER Shares Entrepreneur Private-Public Crossover ETF “offer a more direct way to access private investments in an ETF wrapper, but this remains a niche space with a small amount of net inflows,” Islam said. Typically, investors have accessed private credit via closed-end funds like interval funds and business development companies, which are better equipped to handle liquidity constraints, she noted.
“The attraction here is really just a little bit of yield juice for participating in the US shadow banking sector,” Dave Nadig, a financial futurist and ETF writer, said of potential demand for private credit in the form of public funds. “I’m not sure the extra juice is worth the still-untested liquidity waters of the squeeze, as it were.”
Additionally, the investment thesis of the proposed WisdomTree fund may not stand out from competitors, he noted:
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The Bondbloxx Private Credit ETF, which launched last year, represents $130 million.
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Virtus Private Credit Strategy ETF, started in 2019, represents $55 million.
Chained to the Block: WisdomTree declined to comment on the proposed fund, given that it is in registration. The fund’s blockchain aspect, “is a bit of a distraction,” Nadig said. “WisdomTree is, indeed, out front with this dual-track transfer agency process, and I applaud them for it, but see it as largely a science experiment while we really figure out crypto regulations.”
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