Correspondence 0000929638-24-004264 from SSGA Active Trust (CIK 0001516212)
SSGA Active Trust (CIK 0001516212)
Date: Dec. 18, 2024 · CIK: 0001516212 · Accession: 0000929638-24-004264
AI Filing Summary & Sentiment
File numbers found in text: 333-173276, 811-22542
Letter
via EDGAR Correspondence Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 Re: SSGA Active Trust (the “Registrant”); SEC File Nos. 333-173276 and 811-22542; Post-Effective Amendment No. 220 to the Registrant’s Registration Statement on Form N-1A (“Amendment No. 220”)
Dear Mr. Cowan:
This letter responds to comments you provided in an email correspondence on October 11, 2024, with respect to Amendment No. 220. Amendment No. 220 was filed on September 10, 2024, and included disclosure with respect to the SPDR SSGA Apollo IG Public & Private Credit ETF (the “Fund”), a new series of the Registrant, as set forth in the Fund’s Prospectus and Statement of Additional Information filed as part of Amendment No. 220.
Summaries of the comments with respect to the Fund, and responses thereto on behalf of the Registrant, are provided below. All page references refer to the pages in Amendment No. 220. Capitalized terms not defined herein should be given the meaning provided in Amendment No. 220.
Supplemental Questions and Requests for Information
1.
Comment: Please provide us with a copy of the Liquidity Agreement. To the extent the agreement does not, please also describe:
a.
how the parties will determine the actual price at which Apollo would buy the AOS Investments and how the intra-day executable bid is determined;
b.
what will be the daily limit(s) of Apollo’s obligation to provide executable quotations and/or repurchase AOS Investments, how such daily limit(s) will be determined, and what advance notice of the daily limit(s) the Adviser will receive;
c.
any qualifying circumstances under which Apollo would be exempt or excused from its obligation to buy (or sell) the AOS Investments; and
d.
if intra-day, executable bids represent a guarantee or commitment by the liquidity provider to purchase such investments. Is the contractual arrangement a credit enhancement on the AOS Investment for purposes of determination of “investment grade”?
Response: The Adviser will provide a copy of the Fund’s Liquidity Agreement supplementally.
a.
The Registrant responds supplementally under separate cover.
b.
The Registrant responds supplementally under separate cover.
c.
The Registrant responds supplementally under separate cover.
d.
The Registrant responds supplementally under separate cover.
2.
Comment: Please discuss whether the Liquidity Agreement might be prohibited by Section 12(d)(3) of the Investment Company Act of 1940 (the “1940 Act”).
Response: The Liquidity Agreement is not prohibited by Section 12(d)(3) of the 1940 Act. The Fund may acquire issuances sourced by Apollo where Apollo is acting in its capacity as a broker-dealer. Apollo is not the issuer of the AOS Investments, rather, Apollo is acting as a broker-dealer sourcing AOS Investments that are issued by third-party obligors. The Fund will not be purchasing securities issued by Apollo, the broker-dealer, itself.
3.
Comment: Please provide or describe any additional written or oral agreement (and any other arrangement) between the Fund or the Adviser (or any of their affiliates) and Apollo (or any of its affiliates) related to the Fund.
Response: The Registrant responds supplementally under separate cover.
4.
Comment: The registration statement notes that “if Apollo is unable to meet its contractual obligation to provide firm bids for AOS Investments, the Fund’s assets that were deemed liquid by the Adviser may become illiquid.”
a.
Assuming for purposes of this question that Apollo’s contractual commitment can render the AOS investments liquid under rule 22e-4 of the 1940 Act, and considering the concentration of liquidity risk in a single counterparty that such an approach would raise, what remedial measures does the Fund’s Liquidity Risk Management Program under rule 22e-4 contemplate for situations where Apollo is not able to meet its contractual obligation to provide executable firm bids?
b.
Please also provide us with a copy of the Fund’s Liquidity Risk Management Program.
Response:
a.
The Registrant responds supplementally under separate cover.
b.
The Adviser will provide the Fund’s Liquidity Risk Management Program supplementally prior to the Fund’s launch.
5.
Comment: We note the Fund’s name includes a reference to Apollo. Given Apollo’s role as a liquidity provider to the Fund, please address why it is appropriate to include Apollo in the name of the Fund, including how the use of Apollo in the Fund’s name is not misleading under section 35(d) of the Investment Company Act. Please also provide us with a copy of the licensing agreement for the Fund’s use of Apollo’s name.
Response: The Registrant responds supplementally under separate cover.
6.
Comment: Please describe all of the services, roles and functions that Apollo (or any of its affiliates) will perform, or have, with respect to the Fund. Does the Fund plan to engage with any other service provider that would serve a role similar to Apollo’s, including originating deals and committing to purchase portfolio securities?
Response: The Registrant responds supplementally under separate cover.
7.
Comment: Please describe any direct or indirect compensation that Apollo or its affiliates will provide or receive from the Fund, the Adviser, or any of their affiliates in relation to the Fund.
Response: The Registrant responds supplementally under separate cover.
8.
Comment: Please describe any communication between Apollo, the Adviser, or any of their affiliates regarding the launch of the Fund. Among others, we are interested in the topic of the communications, who initiated them, and when. Also, is Apollo (or any of its affiliates) bearing any of the expenses related to the launch of the Fund?
Response: The Registrant responds supplementally under separate cover.
9.
Comment: What percentage of the Fund’s portfolio does the Adviser anticipate will be comprised of AOS Investments? Does Apollo have a contractual obligation to identify and make available AOS Investments for the Fund to buy?
Response: The Registrant responds supplementally under separate cover.
10.
Comment: With respect to AOS Investments, please describe the process for Apollo sharing the investment opportunities with the Adviser. In particular:
a.
What type of information will Apollo or its affiliates share? Will Apollo or its affiliates provide any view to the Adviser, the Fund or their affiliates regarding the investment opportunities or otherwise discuss the opportunities with them? Or would they only provide a list of the opportunities and their terms?
b.
Who will negotiate the terms under which the Fund will participate in these investment opportunities? Will the Fund receive the same terms as Apollo, or its affiliated persons and Apollo’s clients, to the extent they also participate in the opportunities?
c.
Does Apollo perform a similar role for other investment vehicles with which it does not have an advisory or sub-advisory relationship?
Response:
a.
The Registrant responds supplementally under separate cover.
b.
The Registrant responds supplementally under separate cover.
c.
The Registrant responds supplementally under separate cover.
11.
Comment: Will any personnel of Apollo or its affiliates serve in any capacity for the Adviser, the Fund, or their affiliates?
Response: No; Apollo personnel will not serve in any capacity for the Adviser, the Fund, or their affiliates.
12.
Comment: In terms of the Fund’s investments in AOS Investments that are not publicly traded, what form will they take?
a.
How will these investments be structured and what instruments will the Fund hold? For example, will investments be originated by Apollo or an affiliate of Apollo? Will the Fund use an SPV? Will it invest in bank loans through assignments or participants? Please provide specific examples and a representative list of possible investments.
b.
Will AOS Investments be customized specifically for the Fund?
c.
Will Apollo negotiate or determine specific terms for the AOS Investments it sources (e.g., debt covenants)?
Response: The AOS Investments that are not publicly traded are expected to be loans or other securities for which Apollo has the faculties to source or originate and provide bid and ask prices. The Fund may invest in various types of AOS Investments in accordance with its 80% Policy.
a.
Please see the response to the original portion of the question. The Fund will hold the notes issued to the lender evidencing the terms under which the extension of credit is made to the borrower.
Affiliates of Apollo may originate some or all of the AOS Investments held by the Fund. The Fund currently does not intend to use an SPV to make or hold fund portfolio investments in AOS Investments.
b.
The Registrant responds supplementally under separate cover.
c.
The Registrant responds supplementally under separate cover.
13.
Comment: We note that the Fund intends to invest in private funds, closed-end investment companies (“CEFs”) structured as “interval funds,” or business development companies (“BDCs”) and to limit such investments to 15% of the Fund’s net assets. Will any of these private funds, CEFs or BDCs be managed or sponsored by Apollo or its affiliates?
Response: As noted in the registration statement, the Fund has the ability to and may invest in any of the aforementioned investment vehicles managed by either third-parties or one or more affiliates of Apollo, and that such investments shall remain in the aggregate below 15% of the Fund’s portfolio assets at all times. Furthermore, the Fund will not own more than 5% of any Apollo affiliated CEF or BDC.
14.
Comment: We have the following initial questions on valuation:
a.
Will the board of the Fund designate a valuation designee, as permitted by rule 2a-5 under the 1940 Act, to perform fair value determination? If so, who will the designee be? In addition, if so, what records will be kept (and by whom) for purposes of compliance with Rule 31a-4 under the 1940 Act?
b.
Will Apollo or any of its affiliates be involved in the Fund’s valuation process, and if so, how?
c.
Please describe the procedures for the Fund’s valuation of the AOS Investments. To the extent the Fund relies on valuation inputs from Apollo and its affiliates, will the Fund supplement those inputs with inputs coming from others? If the Fund obtains other valuation inputs for AOS Investments, how will differences in valuation from that process will be resolved?
d.
The registration statement notes that “[s]ome portfolio holdings, potentially a large portion of the Fund’s investment portfolio, may be valued on the basis of factors other than market quotations.” Considering that the Fund is required to strike NAV every day, and considering the Fund’s daily portfolio disclosure pursuant to rule 6c-11 under the 1940 Act, please address how the Fund will fair value these positions daily.
e.
Given the nature of the asset class in which the Fund will invest, has the Fund considered that it might experience significant premiums or discounts as a result of uncertainties in the value of the Fund’s portfolio securities?
f.
Please describe if the intra-day, executable bids provided by Apollo will be utilized in the valuation of investments held by the Fund. Please also describe how the nature of these quotes will be evaluated consistent with ASC 820-10-35-54M.
Response:
a.
The Adviser expects that the Fund’s Board will designate the Adviser as the valuation designee. The Adviser will maintain the books and records in accordance with existing procedures for compliance with Rule 31a-4.
b.
Neither Apollo nor its affiliates will be involved in the Fund’s valuation process.
c.
The Registrant responds supplementally under separate cover.
d.
The Registrant responds supplementally under separate cover.
e.
The Adviser recognizes that exchange-traded funds (“ETFs”) can trade at premiums and/or discounts due to, among other things, uncertainties around the value of their underlying securities. The Adviser recognizes that this is also common in ETFs with credit exposure and international securities where the value is unknown to liquidity providers who must estimate fair value using other investment vehicles and proxies. The Adviser plans to mitigate this risk by setting the appropriate creation/redemption process and disseminating daily values for securities held within the portfolio on the Fund’s website as required pursuant to Rule 6c-11. The Adviser also plans to allow Authorized Participants to deliver cash in lieu of the private assets, which should lead to tighter premiums / discounts to net asset value.
f.
The Registrant responds supplementally under separate cover.
15.
Comment: For Fund investments in private credit, please explain the Adviser’s/Fund’s processes for monitoring the financial trends of each borrower on an ongoing basis to determine if it is meeting its respective business plan and to assess the appropriate course of action for each borrower, including (but not limited to):
a.
A description of the loan review and/or loan rating system and controls that identify, monitor, and manage asset quality problems in an accurate and timely manner;
b.
A description of the systems and controls in place to monitor loan covenants;
c.
Policies and procedures for placing loans on nonaccrual status; and
d.
Policies and procedures for charging off loans.
Response:
a.
The Registrant responds supplementally under separate cover.
b.
The Registrant responds supplementally under separate cover.
c.
The Registrant responds
Show Raw Text
CORRESP
1
filename1.htm
[Letterhead of Morgan, Lewis & Bockius LLP]
Beau Yanoshik
Partner
+1.202.373.6133
beau.yanoshik@morganlewis.com
via EDGAR Correspondence
December 18, 2024
Mr. Mark Cowan
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re:
SSGA Active Trust (the “Registrant”); SEC File Nos. 333-173276 and 811-22542; Post-Effective Amendment No. 220 to the Registrant’s Registration Statement on Form N-1A (“Amendment No. 220”)
Dear Mr. Cowan:
This letter responds to comments you provided in an email correspondence on October 11, 2024, with respect to Amendment No. 220. Amendment No. 220 was filed on September 10,
2024, and included disclosure with respect to the SPDR SSGA Apollo IG Public & Private Credit ETF (the “Fund”), a new series of the Registrant, as set forth in the Fund’s Prospectus and Statement of Additional Information filed as part of
Amendment No. 220.
Summaries of the comments with respect to the Fund, and responses thereto on behalf of the Registrant, are provided below. All page references refer to the pages in Amendment
No. 220. Capitalized terms not defined herein should be given the meaning provided in Amendment No. 220.
Supplemental Questions and Requests for Information
1.
Comment:
Please provide us with a copy of the Liquidity Agreement. To the extent the agreement does not, please also describe:
a.
how the parties will determine the actual price at which Apollo would buy the AOS Investments and how the intra-day executable bid is determined;
b.
what will be the daily limit(s) of Apollo’s obligation to provide executable quotations and/or repurchase AOS Investments, how such daily limit(s) will be determined, and what advance notice of the daily
limit(s) the Adviser will receive;
c.
any qualifying circumstances under which Apollo would be exempt or excused from its obligation to buy (or sell) the AOS Investments; and
d.
if intra-day, executable bids represent a guarantee or commitment by the liquidity provider to purchase such investments. Is the contractual arrangement a credit enhancement on the AOS Investment for purposes
of determination of “investment grade”?
Response: The Adviser will provide a copy of the Fund’s Liquidity
Agreement supplementally.
a.
The Registrant responds supplementally under separate cover.
b.
The Registrant responds supplementally under separate cover.
c.
The Registrant responds supplementally under separate cover.
d.
The Registrant responds supplementally under separate cover.
2.
Comment:
Please discuss whether the Liquidity Agreement might be prohibited by Section 12(d)(3) of the Investment Company Act of 1940 (the “1940 Act”).
Response: The Liquidity Agreement is not prohibited by Section 12(d)(3) of the 1940 Act. The Fund may acquire issuances sourced by Apollo where Apollo is acting in its capacity as a broker-dealer. Apollo is not the
issuer of the AOS Investments, rather, Apollo is acting as a broker-dealer sourcing AOS Investments that are issued by third-party obligors. The Fund will not be purchasing securities issued by Apollo, the broker-dealer, itself.
3.
Comment: Please provide or describe any additional written or oral agreement (and any other
arrangement) between the Fund or the Adviser (or any of their affiliates) and Apollo (or any of its affiliates) related to the Fund.
Response: The Registrant responds supplementally under separate
cover.
4.
Comment: The registration statement notes that “if Apollo is unable to meet its contractual
obligation to provide firm bids for AOS Investments, the Fund’s assets that were deemed liquid by the Adviser may become illiquid.”
a.
Assuming for purposes of this question that Apollo’s contractual commitment can render the AOS investments liquid under rule 22e-4 of the 1940 Act, and considering the concentration of liquidity risk in a
single counterparty that such an approach would raise, what remedial measures does the Fund’s Liquidity Risk Management Program under rule 22e-4 contemplate for situations where Apollo is not able to meet its contractual obligation to provide
executable firm bids?
b.
Please also provide us with a copy of the Fund’s Liquidity Risk Management Program.
2
Response:
a.
The Registrant responds supplementally under separate cover.
b.
The Adviser will provide the Fund’s Liquidity Risk Management Program supplementally prior to the Fund’s launch.
5.
Comment: We note the Fund’s name includes a reference to Apollo. Given Apollo’s role as a
liquidity provider to the Fund, please address why it is appropriate to include Apollo in the name of the Fund, including how the use of Apollo in the Fund’s name is not misleading under section 35(d) of the Investment Company Act. Please
also provide us with a copy of the licensing agreement for the Fund’s use of Apollo’s name.
Response: The Registrant responds supplementally under separate cover.
6.
Comment: Please describe all of the services, roles and functions that Apollo (or any of its
affiliates) will perform, or have, with respect to the Fund. Does the Fund plan to engage with any other service provider that would serve a role similar to Apollo’s, including originating deals and committing to purchase portfolio
securities?
Response: The Registrant responds supplementally under separate
cover.
7.
Comment: Please describe any direct or indirect compensation that Apollo or its affiliates will
provide or receive from the Fund, the Adviser, or any of their affiliates in relation to the Fund.
Response: The Registrant responds supplementally under separate
cover.
8.
Comment: Please describe any communication between Apollo, the Adviser, or any of their
affiliates regarding the launch of the Fund. Among others, we are interested in the topic of the communications, who initiated them, and when. Also, is Apollo (or any of its affiliates) bearing any of the expenses related to the launch of
the Fund?
Response: The Registrant responds supplementally under separate
cover.
9.
Comment: What percentage of the Fund’s portfolio does the Adviser anticipate will be comprised of
AOS Investments? Does Apollo have a contractual obligation to identify and make available AOS Investments for the Fund to buy?
Response: The Registrant responds supplementally under separate
cover.
10.
Comment: With respect to AOS Investments, please describe the process for Apollo sharing the
investment opportunities with the Adviser. In particular:
3
a.
What type of information will Apollo or its affiliates share? Will Apollo or its affiliates provide any view to the Adviser, the Fund or their affiliates regarding the investment opportunities or otherwise
discuss the opportunities with them? Or would they only provide a list of the opportunities and their terms?
b.
Who will negotiate the terms under which the Fund will participate in these investment opportunities? Will the Fund receive the same terms as Apollo, or its affiliated persons and Apollo’s clients, to the
extent they also participate in the opportunities?
c.
Does Apollo perform a similar role for other investment vehicles with which it does not have an advisory or sub-advisory relationship?
Response:
a.
The Registrant responds supplementally under separate cover.
b.
The Registrant responds supplementally under separate cover.
c.
The Registrant responds supplementally under separate cover.
11.
Comment: Will any personnel of Apollo or its affiliates serve in any capacity for the Adviser,
the Fund, or their affiliates?
Response: No; Apollo personnel will not serve in any capacity for
the Adviser, the Fund, or their affiliates.
12.
Comment: In terms of the Fund’s investments in AOS Investments that are not publicly traded, what
form will they take?
a.
How will these investments be structured and what instruments will the Fund hold? For example, will investments be originated by Apollo or an affiliate of Apollo? Will the Fund use an SPV? Will it invest in
bank loans through assignments or participants? Please provide specific examples and a representative list of possible investments.
b.
Will AOS Investments be customized specifically for the Fund?
c.
Will Apollo negotiate or determine specific terms for the AOS Investments it sources (e.g., debt covenants)?
Response: The AOS Investments that are not publicly traded are
expected to be loans or other securities for which Apollo has the faculties to source or originate and provide bid and ask prices. The Fund may invest in various types of AOS Investments in accordance with its 80% Policy.
a.
Please see the response to the original portion of the question. The Fund will hold the notes issued to the lender evidencing the terms under which the extension of credit is made to the borrower.
4
Affiliates of Apollo may originate some or all of the AOS Investments held by the Fund. The Fund currently does not intend to use an
SPV to make or hold fund portfolio investments in AOS Investments.
b.
The Registrant responds supplementally under separate cover.
c.
The Registrant responds supplementally under separate cover.
13.
Comment: We note that the Fund intends to invest in private funds, closed-end investment
companies (“CEFs”) structured as “interval funds,” or business development companies (“BDCs”) and to limit such investments to 15% of the Fund’s net assets. Will any of these private funds, CEFs or BDCs be managed or sponsored by Apollo or
its affiliates?
Response: As noted in the registration statement, the Fund has
the ability to and may invest in any of the aforementioned investment vehicles managed by either third-parties or one or more affiliates of Apollo, and that such investments shall remain in the aggregate below 15% of the Fund’s portfolio assets at
all times. Furthermore, the Fund will not own more than 5% of any Apollo affiliated CEF or BDC.
14.
Comment: We have the following initial questions on valuation:
a.
Will the board of the Fund designate a valuation designee, as permitted by rule 2a-5 under the 1940 Act, to perform fair value determination? If so, who will the designee be? In addition, if so, what records
will be kept (and by whom) for purposes of compliance with Rule 31a-4 under the 1940 Act?
b.
Will Apollo or any of its affiliates be involved in the Fund’s valuation process, and if so, how?
c.
Please describe the procedures for the Fund’s valuation of the AOS Investments. To the extent the Fund relies on valuation inputs from Apollo and its affiliates, will the Fund supplement those inputs with
inputs coming from others? If the Fund obtains other valuation inputs for AOS Investments, how will differences in valuation from that process will be resolved?
d.
The registration statement notes that “[s]ome portfolio holdings, potentially a large portion of the Fund’s investment portfolio, may be valued on the basis of factors other than market quotations.” Considering
that the Fund is required to strike NAV every day, and considering the Fund’s daily portfolio disclosure pursuant to rule 6c-11 under the 1940 Act, please address how the Fund will fair value these positions daily.
e.
Given the nature of the asset class in which the Fund will invest, has the Fund considered that it might experience significant premiums or discounts as a result of uncertainties in the value of the Fund’s
portfolio securities?
f.
Please describe if the intra-day, executable bids provided by Apollo will be utilized in the valuation of investments held by the Fund. Please also describe how the nature of these quotes will be evaluated
consistent with ASC 820-10-35-54M.
5
Response:
a.
The Adviser expects that the Fund’s Board will designate the Adviser as the valuation designee. The Adviser will maintain the books and records in accordance with existing procedures for compliance with Rule
31a-4.
b.
Neither Apollo nor its affiliates will be involved in the Fund’s valuation process.
c.
The Registrant responds supplementally under separate cover.
d.
The Registrant responds supplementally under separate cover.
e.
The Adviser recognizes that exchange-traded funds (“ETFs”) can trade at premiums and/or discounts due to, among other things, uncertainties around the value of their underlying securities. The Adviser
recognizes that this is also common in ETFs with credit exposure and international securities where the value is unknown to liquidity providers who must estimate fair value using other investment vehicles and proxies. The Adviser plans to
mitigate this risk by setting the appropriate creation/redemption process and disseminating daily values for securities held within the portfolio on the Fund’s website as required pursuant to Rule 6c-11. The Adviser also plans to allow
Authorized Participants to deliver cash in lieu of the private assets, which should lead to tighter premiums / discounts to net asset value.
f.
The Registrant responds supplementally under separate cover.
15.
Comment: For Fund investments in private credit, please explain the Adviser’s/Fund’s processes
for monitoring the financial trends of each borrower on an ongoing basis to determine if it is meeting its respective business plan and to assess the appropriate course of action for each borrower, including (but not limited to):
a.
A description of the loan review and/or loan rating system and controls that identify, monitor, and manage asset quality problems in an accurate and timely manner;
b.
A description of the systems and controls in place to monitor loan covenants;
c.
Policies and procedures for placing loans on nonaccrual status; and
d.
Policies and procedures for charging off loans.
Response:
a.
The Registrant responds supplementally under separate cover.
b.
The Registrant responds supplementally under separate cover.
c.
The Registrant responds