Fidelity Private Credit Fund breaks escrow, begins operations

Fidelity’s first BDC has begun operations and will direct lend to mid- and upper-mid-market private companies.

Fidelity Private Credit Fund, a non-traded, perpetually offered business development company in the Fidelity Investments family, issued and sold more than 4 million shares to investors with net proceeds in excess of $100 million on 13 March, receiving funds that had been sitting in an escrow account since the fund’s January launch.

This begins operations for the fund and is another step forward in Fidelity’s continuing move into private debt markets. It is also the first BDC for the Boston-based financial services corporation.

In a statement upon the breaking of escrow, portfolio manager David Gaito said the direct lending team “aims to leverage the resources of our globally integrated investment organisation to access highly attractive credit investment opportunities”.

The Private Credit Fund’s term sheet indicates that the new BDC plans to make quarterly repurchases of up to 5 percent of fund shares at net asset value. It also expects to make monthly distributions. Both the share repurchase plan and the distributions, though, are subject to board approval.

The term sheet also says the portfolio will consist predominantly of direct loans to mid- and upper-mid-market private companies.

Fidelity established its direct lending business in 2021. A source familiar with the details said that Fidelity had more than $628 billion in credit investments under management as of 31 December 2022. The new BDC is available for eligible individual investors. It is distributed through financial advisers and intermediaries in most states in the US.

Fidelity, which has assets under administration of $10.3 trillion, including discretionary assets of $3.9 trillion as of 31 December, has been growing the private credit space for its institutional and individual clients and intermediaries.

In 2020 it launched its Fidelity Distressed Opportunities Fund and Fidelity Real Estate Debt Opportunities Fund. Both have a North American focus.

Before Gaito came to Fidelity in April 2021, he was at PNC Bank for 16 years. According to his LinkedIn profile, he ended his time at PNC as one of four executives responsible for full P&L management of the bank’s mid-market secured lending arm.

His team at the new BDC also includes Therese Icuss and Jeffrey Scott. Icuss is a Fidelity managing director, underwriting and credit. She came to Fidelity in September 2021. Before that, Icuss was co-head of underwriting at Twin Brook.

Scott, also managing director, has worked in mid-market private credit for more than 20 years. Before joining Fidelity in July 2021, he worked at Madison Capital Funding and Cerberus Capital Management.