T. Rowe, Oak Hill partner on private credit fund for mass affluent market

T. Rowe Price Group Inc. and Oak Hill Advisors are launching a new private credit fund open to individual investors in the U.S. to take advantage of the rapidly growing $1.5 trillion market.

The T. Rowe OHA Select Private Credit Fund, or OCredit, already has $1.5 billion of investible capital, according to a statement seen by Bloomberg News. That includes more than $600 million raised in equity commitments from T. Rowe and a group of global institutional investors, with the offering now opening to individuals, it said.

T. Rowe Price, which has $1.4 trillion of assets under management, acquired Oak Hill in late 2021 to expand into alternative markets. Oak Hill is one of the biggest names in direct lending, and recently led on the record-setting $5.3 billion loan package funding Vista Equity Partners’ refinancing of Finastra Group Holdings Ltd.

OCredit follows the example pioneered by Blackstone Inc. with its BRED fund, which now has about $48 billion of assets under management. It’s structured as a non-traded perpetual business development company — a modified version of the BDCs that were established by the U.S. government in the 1980s to facilitate lending to small and midsize firms. In a modified BDC, investors have the option to withdraw their capital, though with a quarterly cap. Similar funds of this type limit investors to those with a net worth of $250,000 or an annual income and net worth of at least $70,000 each.

The fund invests primarily in senior secured loans to larger, well-established companies located mainly in North America, according to the statement. Oak Hill is responsible for lending and managing the fund, while T. Rowe is distributing it, according to people familiar with the matter who aren’t authorized to speak publicly.

“We expect the substantial growth in demand for private financing solutions to continue to drive an attractive investment opportunity for OCredit,” said Alan Schrager, senior partner and portfolio manager at Oak Hill and chairman of OCredit. “Directly originated loans at the top of the capital structure offer the most attractive absolute and relative value in corporate credit currently.”

The $1.5 billion of investible capital that OCredit already has makes it one of the industry’s largest nontraded BDC launches, according to the statement, and it expects to get more institutional capital in the near future, the people familiar said.

WEALTHY INDIVIDUALS

The fund is launching as direct lending continues its rapid growth, with industry research firm Preqin projecting an expansion of the market to $2.3 trillion by the end of 2027. And funds are increasingly targeting wealthy individual investors, with a recent estimate from Apollo Global Management Inc. suggesting that there’s $187 trillion of high-net wealth globally — more than the $102 trillion available in institutional capital.

Since Blackstone’s BCRED first began targeting individual investors with the modified BDC structure, funds from Blue Owl Capital Inc., Apollo and HPS Investment Partners have followed, and similar vehicles have also been catching on in Europe.

[More: Goldman Sachs partners with Canadian pension plan for private credit opportunity]