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Franklin Square launches credit feeder fund

The Philadelphia-based BDC manager announced a new share class offering individual investors access the firm’s credit platform in the spirit of a recent regulatory change.

Franklin Square Capital Partners announced Wednesday (8 June) that it has launched a new feeder fund for its FS Global Credit Opportunities Fund (FSGCO). The fund is designed to be responsive to FINRA Regulatory Notice 15-02 and will provide a new way for individual investors to access opportunities in credit, according to a statement.

FINRA Regulatory Notice 15-02 modified existing accounting requirements related to per share estimated values communicated on customer account statements for direct participation programmes and unlisted real estate investment trust securities. In instances where a fund's offering prospectus does not provide an “amount available for investment” figure, Notice 15-02 requires disclosure of estimated deductions resulting from sales commissions, dealer management fees and organisational expenses. The notice was issued in January 2015 and took effect in April.

In its statement, Franklin Square said that FS Global Credit Opportunities Fund – T (FSGCO – T) responds to this regulatory notice by lowering upfront commissions and thereby increasing the amount of capital available for investment. Whereas an 8 percent commission is paid upfront in the existing class A offering, in the new T share class offering, a 4 percent commission is paid upfront and 4 percent is amortised, according to Franklin Square senior vice president Marc Yaklofsky.

“The structure is designed to put more investor capital at work on day one,” said Yaklofsky in an interview. “Even though this particular fund is not subject to 15-02, it was structured to be responsive to 15-02,” he added.

FSGCO – T was launched on 1 June and consists of 150 million registered shares available to individual investors through broker-dealers, financial advisors and licensed agents. In order to invest in FSGCO – T an investor is required to have a net worth (excluding home, furnishings and personal automobiles) of $70,000 and an annual gross income of $70,000 or a net worth of at least $250,000.

As of Wednesday (8 June) the fund has a net asset value of $7.41 per share and an offering price of $7.72 per share.

“We see tremendous opportunity to capitalise on dislocation in credit markets,” said chairman and chief executive Michael Forman in a statement. “FSGCO provides investors efficient access to a leading credit investment platform,” he said.

FS Global Credit Opportunities Fund is an unlisted closed end fund launched in 2013. The fund is managed by an affiliate of Franklin Square and sub-advised by GSO Capital Partners. It invests in value-based and event driven debt securities in North America and Western Europe and has approximately $1.5 billion in assets under management.

The statement also announced the firm's intention to launch the FS Global Credit Opportunities Fund – ADV (FSGCO – ADV), designed for use in advisory accounts, sometime in the next few weeks. According to a website devoted to FSGCO , 30 million shares will be offered in FSGCO – ADV once Franklin Square's board of trustees has determined an inception date for the fund.