By using an interval fund rather than a limited partnership vehicle, Oppenheimer can offer investors quarterly liquidity. Each quarter, 5% of the fund’s AUM is available for redemptions. If redemption requests exceed 5%, the managers will offer redemptions pro rata.
The fund allocates to direct lending, opportunistic credit, loans and structured credit and “liquid credit” like traditional corporate and sovereign bonds. The managers use the fund’s liquid credit allocation to provide quarterly liquidity for the fund.
“We feel that the primary demand for our strategy is as a cash-flow generator, if you look at where the marketplace is currently and what’s selling at a premium,” says Dane. “If you’re looking at the private credit space, you’re probably making an incremental income of 400 to 500 basis points over bank loans. That’s the impact of the origination and illiquidity premiums together.”
The interval fund structure also allowed Oppenheimer to offer the fund for a $25,000 investment minimum and use 1099 tax reporting in lieu of a more complicated Schedule K-1 form. The fund charges a 1.5% management fee and a 20% incentive fee after a hurdle of 6%, which means the first 6% of distributions generated by the fund all go to the investor. After that, the remaining income is split between investors and managers 80% to 20%. The incentive fee is charged only on income generated by the fund, not on the capital appreciation.
Thus far, the OFI Carlyle Private Credit Fund has garnered $50 million in assets.
While many high-net-worth advisors are accessing private investment opportunities via pooled vehicles offered on technology platforms like iCapital and Artivest, others are creating pooled vehicles of their own. That’s what Houston-based CAZ Investments has done with its Private Equity Access Fund II, says Christopher Zook, founder and CIO of CAZ Investments.
“When we identify something, we’ll put our money in, [and] we’ll open it up to other family offices, institutions and advisors to come alongside us,” says Zook. “We allow advisors and investors to get into investments they otherwise usually can’t get on their own because the minimums are too high and they’re not in the deal flow. We provide access to innovative things that people can’t get on their own.”
CAZ Investments is a $1 billion AUM family office that has been offering access to private equity investments to clients and partners since it was founded in 2001, mostly to qualified clients who are required to have $2.1 million in net worth or qualified purchasers who are required to have $25 million in net worth. In 2017, the firm created the Private Equity Access Fund II to offer access to all its private equity investments to accredited investors, who have a much lower $1 million hurdle.
What makes Zook’s vehicle unique is its liquidity mechanism. “We created a vehicle that has liquidity for the investor at any time after their second year in the investment,” says Zook. “That goes back to our structure as a multifamily office. Because we have a shareholder base willing to make the investments, they’ve also been willing to be a backstop and allow investors and advisors to get into an opportunity and literally get any dime that they put into it out after the second year.”
Of course, pulling money out of the vehicle early results in the loss of the time value of the investor’s money, says Zook—the investor receives their original investment back sans gains. CAZ’s strategies have invested with Google in the ride-sharing company Lyft, alongside John Paulson in shorting subprime mortgages ahead of the global financial crisis, and in private pipeline partnerships amid the Texas shale oil and gas boom.