Non-traded BDC pipeline show big changes are coming
BDCs assets have have surged in the past year. Will the growth continue?
For now, the structural changes in the broader macroeconomy and the investment management industry that have driven NT BDC asset growth are still in motion. Moreover, the pipeline of recently launched, and soon to launched funds supports the idea that the recent growth will continue and may even accelerate in the next year. Eighteen NT BDCs have launched so far in 2022, including thirteen private funds, and five public funds.
The details of these new launches also hint at the potential magnitude of coming growth for NT BDC assets.
Change is Coming
More traditional asset managers have continued to enter the NT BDC market. So far in 2022 Pimco, Fidelity, and T Rowe Price have all made initial filings for non-traded BDCs. These firms will all benefit from established distribution networks, and brand names that are familiar to financial advisors. Moreover, a larger portion of their existing customer relationships are outside the traditional alternative investment industry. Therefore, they will likely be expanding the market, rather than competing with other alternative managers for assets. Also note, Fidelity and T Rowe Price each have diversified financial services businesses which will give them unique access to detailed proprietary data on a wider range of potential investors. It is exceedingly unlikely these major financial services firms would launch NT BDCs unless they anticipated they could raise funds that were large relative to the existing size of the market.
Many firms with existing alternatives businesses are also launching new NT BDCS. Nuveen and Blackrock are other examples of traditional assets management firm that were earlier to the alternatives market , and they have both launched new non-traded BDCS in 2022. Other firms familiar with anyone who watches the private equity and private credit space, such as Golub Capital, Owl Rock, Ares, Oaktree, and Bain have also launched new funds in 2022.
Recent Non-traded BDC Launches
The following table lists all the non-traded BDCS that have launched
|Fund||Offering Type||Term||Launch Date|
|TCW Star Direct Lending LLC||Private||Finite||9/1/2022|
|Brightwood Capital Corp||Private||Finite||7/29/2022|
|Nuveen Churchill Private Capital Income Fund||Public||Perpetual||7/22/2022|
|PIMCO Capital Solutions BDC Corp||Private||Finite||7/11/2022|
|Sixth Street Lending Partners||Private||Finite||6/28/2022|
|Varagon Capital Corp.||Private||Finite||6/2/2022|
|BlackRock Private Credit Fund||Public||Perpetual||5/31/2022|
|New Mountain Guardian IV BDC L.L.C.||Private||Finite||5/6/2022|
|Wellings Real Estate Income Fund||Private||Finite||5/3/2022|
|AFC BDC Inc.||Private||Finite||4/29/2022|
|AGTB Private BDC||Private||Finite||4/18/2022|
|Redwood Enhanced Income Corp.||Private||Finite||4/1/2022|
|Golub Capital Direct Lending Unlevered Corp||Private||Finite||3/31/2022|
|Golub Capital BDC 4 Inc.||Private||Finite||3/31/2022|
|Owl Rock Technology Income Corp.||Public||Perpetual||2/11/2022|
|Oaktree Strategic Credit Fund||Public||Perpetual||2/3/2022|
|HPS Corporate Lending Fund||Public||Perpetual||1/27/2022|
|North Haven Private Income Fund LLC||Private||Perpetual||1/24/2022|
Note that all the public NT BDCs launched in 2022 so far are perpetual life vehicles. In contrast, all but one of the private BDCs is a finite life vehicle.
Recent non-traded BDC registrations
Several high-profile firms have funds still pending registration, and they will likely launch within the next few months. The following table shows notable public NT BDCS that are pending registration as of the date of this report.
|Fidelity Private Credit Fund||Perpetual||9/6/2022|
|T. Rowe Price OHA Private Credit Fund||Perpetual||7/28/2022|
|Ares Strategic Income Fund||Perpetual||8/8/2022|
|Bain Capital Private Credit||Perpetual||12/23/2021|
Investors seeking private credit exposure can now choose from several non-traded BDCs managed by top brand name asset management firms. Asset managers entering the space will face increased competition, but also benefit from the mainstream acceptance of the fund structure. Successful NT BDC sponsors will find ways to distinguish themselves from the competition through prudent underwriting and skilled deal sourcing.
The NT BDC sector has been here for years. It started as a backwater of the credit markets, but it has grown and transformed into a critical part of the financial system. No asset manager or credit investor can afford to ignore NT BDCs.
Note: This is an excerpt adapted from a Pro Research Report: Don’t Call it a Comeback: The Revival and Transformation of the Non-traded BDC Sector, available to Alternative Investments Pro Members. Click here to sign up and access the full report. Already a member? Click here to login and access the content.