Institutions Seed Multi-Billion-Dollar ETFs as Product Role Expands Beyond Beta

University of California and Texas Permanent School Fund deployed $2.5 billion and $740 million respectively into custom State Street products, signaling a shift from passive indexing to bespoke portfolio solutions.

By the Family Office Real Estate Daily Desk·Thursday, October 15, 2026·2 min read

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Why are large institutional investors like the University of California and Texas Permanent School Fund seeding custom ETFs with billions of dollars?

The University of California Board of Regents seeded State Street's 90/10 Endowment Strategy Index ETF (UCBG) with $2.5 billion, making it the largest U.S.-listed ETF on record, while the Texas Permanent School Fund invested approximately $740 million in State Street's actively managed PRIV credit ETF. Both transactions signal a shift in institutional ETF use from passive beta exposure toward bespoke, objective-driven portfolio solutions.

Key facts

The University of California Board of Regents seeded State Street's 90/10 Endowment Strategy Index ETF (ticker UCBG) with a $2.5 billion investment, which made it the largest U.S.-listed ETF on record, according to reports.
The Texas Permanent School Fund, with roughly $65 billion in assets, purchased approximately 29 million shares worth about $740 million in State Street's actively managed IG Public and Private Credit ETF (PRIV) in May.
State Street's PRIV ETF targets 80% investment-grade debt but may invest up to 20% in high-yield bonds and 35% in illiquid securities, via an agreement with Apollo Global Securities.
As of October 9, State Street's PRIV ETF reported 21.93% of its holdings were sourced by Apollo, according to the ETF's own reported figures.
The UCBG ETF is based on UC's $7.9 billion Blue and Gold Endowment Pool, which UC noted has been the best-performing product within its $236 billion portfolio.
Anna Paglia, State Street Investment Management's chief business officer, said asset owners are engaging more deeply where they have a specific portfolio need that can benefit from the ETF structure.

Institutions Seed Multi-Billion-Dollar ETFs as Product Role Expands Beyond Beta — Image: editorial illustration · Story sourced from Chief Investment Officer

The University of California Board of Regents launched a $2.5 billion ETF with State Street Investment Management last month, marking the largest U.S.-listed exchange-traded fund on record, according to reports. UC Investments provides the 90/10 Endowment Strategy Index under license to State Street. The product trades under ticker UCBG.

The ETF is based on the university's $7.9 billion Blue and Gold Endowment Pool, a low-cost, liquid public markets vehicle UC added seven years ago. A statement from UC noted that it has been the best-performing product within its $236 billion portfolio. UCBG allocates 90% to the S&P 500 Index and 10% to the S&P U.S. Investment Grade Corporate Bond 1-3 Year Index.

Texas Permanent School Fund, with roughly $65 billion in assets, took a different approach in May when it purchased approximately 29 million shares—worth about $740 million—in State Street's actively managed IG Public and Private Credit ETF. The fund, which trades as PRIV, invests in investment-grade debt, including private credit, via an agreement with Apollo Global Securities. As of October 9, the ETF reported 21.93% of its holdings were sourced by Apollo.

The fund targets 80% investment-grade but may invest up to 20% in high-yield bonds and 35% in illiquid securities. Texas Permanent School Fund Co-CIO Stuart Bohart said the fund is willing to be an early or seed investor in products when the stability of its capital and long-term approach allows it to gain advantage through a combination of secured capacity, attractive pricing and enhanced access to the investment manager.

Anna Paglia, State Street Investment Management's chief business officer, said asset owners are engaging more deeply where they have a specific portfolio need, investment framework or implementation challenge that can benefit from the ETF structure. That involvement reflects an evolution in how institutions view ETFs, she said.

Allocations that look conservative in benign markets often turn out to be the ones that compound through the rough years, family office advisor Jaf Glazer has noted.

Bohart said PRIV is part of the fund's broader liquid fixed-income allocation. The ETF structure and supporting market-making give the fund confidence that liquidity is available, he said. The experience of the investment team and quality of the infrastructure give confidence in superior risk-adjusted returns, he said. The ETF's role as core beta in the portfolio combined with the fund's long-term horizon give confidence that the advantages of the State Street relationship will bear fruit for many years, he said.

UC CIO Jagdeep Singh Bachher said in a statement that the university focuses on building long-term, cost-effective portfolios to support hundreds of thousands of UC students, faculty, staff and alumni for generations to come. The record-breaking ETF launch makes the institutional investment philosophy available to a broader community of investors through the transparency, efficiency and accessibility of the ETF structure, while staying true to the principles that have guided the investment approach, he said.

The Deployment Angle

Family Office Real Estate Daily Desk · our analysis, not the source's

The Texas deployment offers the clearer template for family office capital. A $740 million commitment to an illiquid-capable, actively managed credit ETF suggests the route is not passive beta but rather co-investment alongside a known sponsor in a wrapper that preserves day-to-day liquidity. The fund allows up to 35% illiquid exposure, meaning a family office writing a $50 million cheque could be pricing exposure to as much as $17.5 million in private credit sourced by Apollo while retaining the right to exit the public wrapper at NAV or close to it.

Secured capacity and enhanced manager access are the economic prizes Bohart cited. Family offices should therefore underwrite these products as if they were separate-account structures with a liquidity option, not index funds. That means diligencing the Apollo sourcing agreement, the market-making arrangements that backstop secondary liquidity, and the structural edge Bohart referenced—likely the ability to buy illiquid paper at a spread premium unavailable to listed bond funds. Price the illiquidity as you would in a direct deal, then treat the ETF wrapper as an embedded put with a cost equal to the tracking error and bid-ask spread.

The UC launch is harder to replicate unless you control $2.5 billion and have a two-decade relationship with the asset manager. It is effectively an index fund with a governance tail, not a private-market access play. The deployment angle for that structure is narrow: family offices with legacy public equity mandates who want to lower fees and gain some co-branding visibility might consider seeding a custom beta product if the manager will warehouse it and the office can contribute intellectual property in the form of a strategy or index methodology.

What to avoid is the middle ground—writing a mid-eight-figure check into an ETF that promises private-market exposure but offers neither the structural edge of PRIV nor the fee economics and control of a direct mandate. If the product cannot explain how its market-making infrastructure handles redemptions when 20% or more of the book is illiquid, and if the sponsor has no prior relationship with your office, the liquidity you are paying for is likely to evaporate precisely when you need it. Underwrite the worst-case secondary exit, not the pitch-deck liquidity profile.

Questions this story answers

01Why did the University of California seed a $2.5 billion ETF with State Street?

UC CIO Jagdeep Singh Bachher said the goal was to make UC's institutional investment philosophy available to a broader community of investors through the transparency, efficiency, and accessibility of the ETF structure. The ETF is based on UC's $7.9 billion Blue and Gold Endowment Pool, which UC noted has been the best-performing product within its $236 billion portfolio.

02What is the investment strategy inside the UCBG ETF launched by the University of California and State Street?

UCBG is 90% allocated to the S&P 500 Index and 10% allocated to the S&P U.S. Investment Grade Corporate Bond 1-3 Year Index, according to the source. UC Investments provides the 90/10 Endowment Strategy Index under license to State Street.

03Why did the Texas Permanent School Fund invest $740 million in State Street's PRIV ETF?

Texas Permanent School Fund Co-CIO Stuart Bohart said the fund is willing to be an early seed investor when the stability of its capital and long-term approach allows it to gain advantage through secured capacity, attractive pricing, and enhanced access to the investment manager. Bohart also said PRIV includes an attractive structural edge expected to lead to benchmark-beating performance over time.

04How are large institutions changing the way they use ETFs beyond simple index exposure?

Anna Paglia, State Street Investment Management's chief business officer, said institutions are increasingly considering how ETFs can accomplish more specific portfolio objectives rather than treating them only as efficient instruments for obtaining market exposure. Paglia said institutions may begin with liquid beta exposures and expand into more targeted, active, and differentiated strategies as they gain experience with the structure.

05What role does Apollo Global Securities play in State Street's PRIV ETF?

State Street's PRIV ETF invests in investment-grade debt, including private credit, via an agreement with Apollo Global Securities. As of October 9, the ETF reported that 21.93% of its holdings were sourced by Apollo.

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