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How market’s private credit crisis fears are spreading to bond ETFs

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Market volatility is pushing investors back to basics in the ETF industry
Market volatility is pushing investors back to basics in the ETF industry

Fears of a private credit crisis are rising as firms at the heart of the growing, but less liquid and less transparent, bond market face investor redemptions. That stress test has arrived just as private loans became more prevalent in the ETF market. It was a little over a year ago that the Securities and Exchange Commission approved the first ETF branded as a private credit fund.

For ETF investors, the good news it that the risks represented by the asset class are showing up in a more controlled way, as ETFs invest directly in private credit issues are still limited in how much exposure they can have to the asset class — up to, but not exceeding 35%.

Some other, older ETF products that are tied to private credit get indirect exposure only, according to Todd Rosenbluth, head of research at VettaFi, said on CNBC’s “ETF Edge. They use vehicles like business development companies and closed end funds that primarily invest in the private credit sector. While that adds liquidity compared to holding private loans directly, it is not without investor concern in the current environment.

The VanEck BDC Income ETF (BIZD), which has roughly $1.5 billion in assets and dates back to 2013, is down 13% since the start of the year. The reason is clear: among BIZD’s top holdings are publicly traded shares of some of the private credit managers in the news, including Blue Owl Capital and Ares Capital. Blue Owl shares are down over 46% this year.

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The Simplify VettaFi Private Credit Strategy ETF (PCR) is down around 20% in the past year and also focused its investments in business development companies and closed end funds.

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PCR YTD

Liquidity remains the main concern for investors, and private credit is not meant for daily trading the way ETFs are, which has resulted in issues between private credit managers and investors wanting to pull out their funds. But in the ETF space, daily liquidity and trading always give investors the option to sell, though it may come at a cost.

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“You can get out, you’re just going to pay or you’re going to sell at a discount to net asset value,” Rosenbluth said.

BIZD closed at a discount to its net asset value 37 times in calendar year 2025, and so far, 12 times this year.

Private credit funds, meanwhile, often restrict withdrawals during times of stress. “You’re gating because you said we can’t have a run on the bank,” Rosenbluth said.

Limits on redemptions help prevent forced selling and instability, though they don’t necessarily help to calm market fears.

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State Street‘s private credit ETFs, developed with alternative investments manager Apollo Global and which included the first private credit branded ETF approved by the SEC, are examples of how access is being structured within ETFs. The State Street IG Public & Private Credit ETF (PRIV) was the first of its kind, approved by the SEC in February 2025. The State Street Short Duration IG Public & Private Credit ETF (PRSD) launched later in 2025.

These funds are meant to outperform standard bond benchmarks by including investment-grade private credit, and can both hold as much as 35% in private credit issues, or at times less than 10%. According to the State Street ETF web site, only one of PRIV’s current top 10 holdings is private credit, with treasury and mortgage-backed securities dominating in the top 10. PRSD’s top holdings are a mix of government, mortgage and currency holdings.

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Performance of State Street’s private credit ETF, the first approved by the SEC, over the past year versus the aggregate bond index.

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PRIV has $831 million assets under management; PRSD is much smaller, at $48 million in assets under management. Both have seen relatively flat performance since the beginning of the year. Both PRIV and PRSD hold slightly over 20% of assets in Apollo-sourced investments, according to State Street data.

Jeffrey Rosenberg, systematic fixed income senior portfolio manager at BlackRock, who runs a long-short strategy in an ETF wrapper, says the private credit investing issues are one example of how much ETFs have changed fixed income markets. As active portfolio managers in the bond market meet more investors through ETFs, it allows them more precision in targeting specific parts of the credit market. “They’ve just completely changed how liquidity provisioning, price discovery … how the ecosystem of credit market-making functions in a modern credit market,” he said on “ETF Edge.”

Money has been on the move during the recent market volatility, according to Rosenbluth, with ETF investors “taking some risk off” and moving from longer-duration bond funds into shorter-duration funds.

The biggest systemic risk in private credit markets comes from the asset-liability mismatch. “The run on the bank,” Rosenburg said. But it is his view that this type of risk is less pronounced today since many private credit vehicles limit liquidity by design. That cannot eliminate risk, but can make the risks surface more gradually, Rosenburg explained, saying impact could take place over longer time horizons as companies face refinancing at higher rates.

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Both Rosenbluth and Rosenburg explained that the result of this is a system that absorbs shock differently. Private credit funds may restrict redemptions and ETFs allow for continuous trading with real-time price adjustments — allowing markets to keep functioning while reflecting stress as it develops. Both approaches, they say, aim to prevent disorderly outcomes.

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Crypto World

Bitcoin (BTC) Slides as U.S.-Iran Negotiations Fail in Islamabad

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Bitcoin (BTC) Price

Key Takeaways

  • Iranian and U.S. representatives convened in Pakistan’s capital on April 11–12 for direct diplomatic discussions following weeks of military tensions
  • No agreement was secured after approximately 21 hours of intensive negotiations, Vice President JD Vance announced
  • Tehran’s unwillingness to abandon nuclear weapons development emerged as the primary obstacle to a settlement
  • Bitcoin experienced a 2% decline to approximately $71,500 in the aftermath of the failed negotiations
  • XRP decreased 1.69% to $1.33, while Ethereum slipped 1.26% to $2,216, with cryptocurrency markets broadly declining 1–3%

High-ranking officials from Washington and Tehran convened in Pakistan’s capital on April 11 for their first direct, senior-level diplomatic engagement in decades. These discussions came after weeks of military confrontation that erupted on February 27, when the United States and Israel executed joint military operations dubbed “Operation Epic Fury,” striking Iranian military installations and nuclear facilities. The operations resulted in the death of Supreme Leader Ali Khamenei.

The military escalation sent shockwaves through global energy markets and international financial systems. Critical maritime passages near the Strait of Hormuz, responsible for significant portions of worldwide petroleum transport, experienced disruptions due to the intensifying conflict.

Pakistan assumed a crucial intermediary position, providing neutral ground for both parties. While previous ceasefire initiatives had temporarily de-escalated tensions, no permanent resolution had materialized prior to these diplomatic sessions.

Before negotiations commenced, Tehran reportedly pursued sanctions removal, unfreezing of financial assets, and security assurances. Washington maintained firm positions regarding restrictions on Iran’s nuclear capabilities and maintaining freedom of navigation through strategic waterways.

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Esmaeil Baqaei, Iran’s Foreign Ministry spokesperson, characterized the 24-hour discussion period as addressing the Strait of Hormuz situation, nuclear program concerns, compensation for war damages, sanctions removal, and complete conflict resolution. He indicated that results would hinge on “the seriousness and good faith of the opposing side.”

Baqaei further urged Washington to refrain from “excessive demands and unlawful requests” while honoring Iran’s “legitimate rights and interests.”

Diplomatic Efforts Conclude Without Agreement

Following approximately 21 hours of intensive discussions, Vice President JD Vance announced at a media briefing that negotiators failed to reach a settlement.

“The bad news is that we have not reached an agreement,” Vance stated. He noted that the U.S. had presented its position comprehensively throughout the talks.

According to Vance, the fundamental obstacle centered on Iran’s refusal to pledge abandonment of nuclear weapons ambitions. “The simple fact is that we need to see an affirmative commitment that they will not seek a nuclear weapon,” he explained.

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The American delegation departed Pakistan without securing any agreement. The trajectory of the conflict remains uncertain moving forward.

Cryptocurrency Markets Decline Following Failed Talks

Digital asset markets responded swiftly after Vance’s public statement. Bitcoin declined to approximately $71,500, representing a roughly 2% daily loss.

Bitcoin (BTC) Price
Bitcoin (BTC) Price

Short-term trading charts revealed a pronounced selloff directly correlated with news reports about the diplomatic impasse.

XRP retreated 1.69% to $1.33. Ethereum declined approximately 1.26% to $2,216. Comprehensive losses throughout cryptocurrency markets spanned from 1% to 3%.

As of April 12, the standoff between Washington and Tehran persists without resolution.

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Ether Machine Abandons Public Debut as Dynamix Merger is Terminated

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Ether Machine Abandons Public Debut as Dynamix Merger is Terminated

Ether Machine has called off its planned public debut after the Ethereum treasury-focused firm and Dynamix Corporation agreed to terminate their merger, citing deteriorating market conditions.

In a Saturday post on X, Ether Machine said the decision to end the deal was mutual and effective immediately. The transaction had aimed to take the firm public through a merger with the Nasdaq-listed special purpose acquisition company (SPAC), alongside involvement from The Ether Reserve LLC.

“The Ether Reserve LLC, together with certain other parties thereto, announced today that they have mutually agreed to terminate their previously announced Business Combination Agreement, effective immediately, as a result of unfavorable market conditions,” the firm wrote.

According to a filing with the US Securities and Exchange Commission, an unnamed “Payor,” identified in Annex A of the agreement but not disclosed publicly, must pay $50 million to Dynamix within 15 days of the termination taking effect.

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Related: Bitmine uplists to NYSE as share buyback is increased to $4B

Ether Machine’s $1.5 billion Ethereum treasury plan collapses

Ether Machine first announced plans to launch what it described as the largest yield-bearing Ether (ETH) fund aimed at institutional investors in July last year. At the time, the company, co-founded by former Consensys executives Andrew Keys and David Merin, said it would list on Nasdaq under the ticker “ETHM,” launching with more than 400,000 ETH, worth over $1.5 billion at the time, under management.

In September, Ether Machine secured $654 million in a private financing round, including 150,000 ETH from Ethereum advocate Jeffrey Berns, who also joined the company’s board. The raise was part of its broader plan to build a large Ether treasury ahead of the planned Nasdaq debut, which has now been canceled.

Top Ether treasury firms. Source: EthereumTreasuries.NET

Meanwhile, Dynamix retains a limited window to secure a new deal. The company has until November 22, 2026, to complete another business combination. If it fails to do so, it will be required to liquidate and return funds held in trust to shareholders, in line with its corporate charter.

Related: Peter Thiel’s Founders Fund dumps ETHZilla stake as ETH treasuries face pressure

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Ethereum treasury exits deepen

Ether funds exit amid mounting pressure on Ethereum treasury strategies. Trend Research has fully unwound its Ethereum position, selling 651,757 ETH worth about $1.34 billion while locking in an estimated $747 million loss.

Separately, ETHZilla, formerly a biotech firm that pivoted into an Ethereum treasury strategy during the 2025 hype, has also moved away from Ether accumulation, updating its corporate name and brand to Forum Markets.

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