State Street debuts first Australian active ETFs

State Street Investment Management has expanded its footprint in the Australian market with the launch of its first active ETFs. The firm partnered with private credit manager Blackstone to introduce the funds. The new products, set to list on the Australian Securities Exchange on August 7, target investors looking for income through corporate credit exposure.

Targeting High Yield and Senior Loans

The two funds are the State Street Blackstone Senior Loan (AUD Hedged) Active ETF (SBSL) and the State Street Blackstone High Income (AUD Hedged) Active ETF (SBHI). SBSL seeks to provide exposure primarily to sub-investment grade floating rate senior secured bank loans. This strategy aims to provide income while managing interest rate risk through floating rate instruments. SBHI takes a different approach. It is an income-focused ETF that seeks exposure to a dynamic allocation across liquid credit markets.

Both vehicles are feeder funds that invest in two existing US ETFs. The primary target for SBSL is the State Street Blackstone Senior Loan ETF, which launched in 2013 and holds US$5.2 billion in assets. SBHI feeds into the State Street Blackstone High Income ETF, a US$569 million fund that started in 2022. These Australian versions are hedged to the Australian dollar to protect against currency fluctuations.

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For retail investors, this launch lowers the barrier to entry for institutional-grade credit strategies. Private credit and senior loan markets have traditionally been the domain of large institutional funds or high-net-worth individuals. By wrapping these strategies in an active ETF structure, State Street and Blackstone are offering a level of liquidity and transparency that is often absent in direct private credit investments. This allows everyday investors to access the same credit research and scale that usually requires millions in capital.

Developed in collaboration with Blackstone, the funds aim to provide access to the firm’s credit expertise and proprietary research. The structure is designed to deliver this through a transparent and liquid ETF wrapper. This approach differs from traditional private equity or private credit funds, which often lock up investor capital for years.

Expanding a Local Presence

State Street Investment Management will have a total of 19 ETFs listed on the ASX following the addition of the two new ETFs. The move comes as August marks 25 years since it listed the first ETFs in Australia, the State Street SPDR S&P ASX 200 ETF and State Street SPDR ASX 50 ETF. While the firm built its reputation on passive index tracking, this move into active management represents a significant evolution in its product lineup. Active ETFs charge higher fees than passive funds and rely on the manager’s ability to outperform the market.

Flora Herries, head of APAC product at State Street Investment Management, pointed to the size of the opportunity. “SBSL is the first ETF in Australia primarily allocating to US senior loans, offering investors access to the $2.87 trillion segment of the US corporate credit market,” she said. Herries also noted the regulatory environment. “With bank hybrids being gradually phased out, many investors are seeking alternative high yield solutions.”

These products offer exposure to the higher yielding segments of the corporate bond market. Dan Leiter, global head of liquid credit strategies at Blackstone Credit & Insurance, discussed the partnership. “We are pleased to partner with State Street to expand access to liquid credit in Australia,” Leiter said. He highlighted the region’s importance to Blackstone’s investment history.

Blackstone manages substantial assets in this space. The firm sees the Asia Pacific region as a key growth area for its credit business. “This partnership shows our commitment to broadening our credit capabilities for a diverse investor base across the Asia Pacific region, where we continue to expand our platform and teams,” Leiter added. The products channel expertise from Blackstone’s $185 billion global liquid credit platform.