U.S. financial leaders see private assets to enter more investor portfolios

Suzanne McGee

(Reuters) - Individual investors said at the Milken Academy’s annual global conference on Monday that more and more financial products will grow in the coming months and years.

To date, only a handful of exchange-traded funds and other products targeting investors of non-high net worth buyers have been approved or launched, but advanced data from banks, asset managers and private equity firms are likely to grow.

“I think traditional asset managers will be our biggest clients in the future,” Marc Rowan, co-founder and CEO of Apollo Global Management said in the conference panel. “I don’t think the new forms of active management will become the buying and selling of stocks. This will be the private asset of a portfolio of publicly traded securities so far.

Apollo, in partnership with State Street Global Consultants, launched the SPDR SSGA Public and Private Credit ETF in February. Analysts say ETFs have attracted meager inflows so far, with assets of just $54.7 million.

People take photos of photos taken on the charging cattle statue in the financial district, also known as Wall Street.

State Street could not comment immediately.

"It's difficult to build enough liquids to meet SEC rules while meeting SEC rules," said Bryan Armor, ETF analyst at Morningstar.

This does not stop the asset manager from trying. Last week, Capital Group and KKR won SEC approval to release two new “interval funds” – closed-end products that offer only limited liquidity to holders, which will have publicly traded and private debt securities. Vanguard said in mid-April it will launch similar products with Blackstone Inc. Vanguard rejected any other comments.

"I hope there will be a series of events in the second year that will be united with different companies in the second year," Citigroup CEO Jane Fraser told another Milken College group.

But the charm of opening up most of the untapped corners of financial markets to financial advisors and their retail clients may collide with the reality of building a private credit investment vehicle for that audience.

"Understanding is very important: insufficient liquidity," Jenny Johnson, CEO of Franklin Templeton, said at a Milken event.