JP Morgan Chase & Co is planning to launch a private credit interval fund with a higher-than-usual quarterly redemption cap of 7.5 per cent and the potential for monthly withdrawals.
Funds available to the wealth market typically have a 5 per cent redemption cap.
A prospectus for the JPMorgan Public and Private Credit Fund filed this week revealed that it currently expects to offer to repurchase 7.5 per cent of the fund’s outstanding shares quarterly.
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However, if a repurchase exemptive relief is granted by the Securities and Exchange Commission (SEC), the fund will offer to repurchase at least two per cent of its shares at net asset value on a monthly basis.
JPMorgan said in its application to the SEC that monthly repurchases “offer many benefits” and that they are therefore “in the public interest and in the common shareholders’ interests”.
The fund launch comes at a time when business development companies (BDCs) have faced a flurry of redemption requests as heightened concerns around credit quality in private credit prompted a sell-off.
BDCs’ exposure to the software sector have been a cause for concern in the US wealth market in particular, given the threat to the sector posed by artificial intelligence.
In response, many firms have capped redemption requests at 5 per cent, although interval funds are designed to permit repurchases of between 5 per cent and 25 per cent of outstanding shares on a quarterly basis.
Analysts at JP Morgan Private Bank recently stated that fears of a private credit-led crisis have been “overstated”, however, and concluded the growth of private credit does not pose a systemic risk to the economy.
JP Morgan Investment Management, which serves as the fund’s investment adviser, will invest in public and private credit investments and credit-related investments, including loans, bonds, collateralised debt obligations, collateralised loan obligations, asset-backed securities, credit-linked assets, and credit-linked notes.
It will have a remit to invest at least 80 per cent in a “broad range” of credit investments, including securities in the US and other markets globally, both developed and emerging.
The adviser will be able to pursue co-investment opportunities, including with third-party private credit funds that have “demonstrated success”, according to the prospectus.
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