Evergreen fund auction could offer an exit when redemptions are prorated

WealthManagement.com reported on Oct. 22 that an auction for evergreen fund shares could give investors a way out when a fund prorates, without hitting redemption caps or accepting deep discounts.

Blue Owl halted quarterly redemptions on OBDC II and replaced them with periodic distributions funded by asset sales and loan repayments — a step Stanger's Michael Covello characterized as an orderly liquidation. The first distribution is expected near 30% of NAV, with later payouts unquantified, according to WealthManagement.com. The step came after worries about the assets inside private credit BDCs pushed redemption requests past managers' quarterly caps, typically 5% of net asset value; some managers temporarily met higher levels. Requests have since subsided, and private placement BDCs have met most of them, according to WealthManagement.com.

“When investors can get redemptions at NAV, they generally do not view liquidity with large discounts to NAV as attractive versus waiting,” Michael S. Covello, executive managing director at Robert A. Stanger, said in comments quoted by WealthManagement.com.

Cox Capital Partners and Saba Capital Management offered in March to buy 6.9% of Blue Owl Capital Corporation II at a 34.9% discount to NAV, while similar offers averaged a 26% discount. The similar offers covered non-traded private credit BDCs managed by HPS Investment Partners, Apollo Global Management and Ares Management and drew little investor interest, according to WealthManagement.com.