Fidelity launches its first BDC

The financial services giant expands its alternatives business with a retail private credit fund.

Fidelity Investments has launched Fidelity Private Credit Fund, a $1 billion, non-traded, perpetual life business development company that will be offered to retail investors through financial advisers and other intermediaries in 43 states.

The fund will be managed by Fidelity Diversifying Solutions, an investment adviser that was established to support the growth of Fidelity’s alternative investment offerings.

Fidelity launched its Distressed Opportunities Fund and its Real Estate Debt Opportunities Fund in 2020. The Distressed Opportunities held a first close in June of 2020 on $267.3 million, several months after its launch, according to PDI research. The real estate fund held its second close in October 2021 on $123.6 million. Fidelity’s Real Estate Opportunistic Income Fund, a subordinated debt fund, launched in April 2007 and held a ninth close on $347.7 million in July 2022.

“With the launch of Fidelity Private Credit Fund, Fidelity leverages the depth and breadth of our credit-focused resources to offer our clients an income-oriented strategy in the private credit markets,” David Gaito, portfolio manager of Fidelity Private Credit Fund and head of direct lending at Fidelity Investments, said in a statement. “We continue to see significant growth in the private credit market and Fidelity’s direct lending team aims to use our extensive network to access high credit quality investment opportunities.”

According to the release, Fidelity established its direct lending business in 2021, and it has sourced, underwritten or managed diverse credit and lending teams in a variety of market environments. In addition to Gaito, the team, with more than $620 billion in credit investments under management as of 30 June 2022, include portfolio managers Therese Icuss and Jeffrey Scott.

Investors must have either a net worth of $250,000 or both net worth and annual net income of $70,000, according to the prospectus. The company said individual broker dealers may impose additional eligibility requirements. Base management fees are 1.25 percent, and along with other expenses, total annual expenses will range from 4.89 percent to 5.74 percent, per the prospectus.

The Fidelity Private Credit Fund will be sold both through Fidelity Institutional’s Alternative Investments Platform via +SUBSCRIBE at launch, and iCapital shortly after. The fund is also expected to be available via CAIS in the coming months.

Fidelity had assets under administration of $9.6 trillion, including discretionary assets of $3.6 trillion, as of 30 September 2022. In 2022, Fidelity launched three liquid alts mutual funds – Fidelity Hedged Equity Fund (FEQHX), Fidelity Macro Opportunities Fund (FAQAX) and Fidelity Risk Parity Fund (FAPSX) – available for individual investors and advisers to purchase commission-free through Fidelity’s online brokerage platforms. Retail investors also have access to alts mutual funds on Fidelity’s platform.