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Rating:A BDC Specialist Enters 40 Act Country Not Rated 1.0 Email Routing List Email & Route  Print Print
Friday, December 12, 2014

A BDC Specialist Enters 40 Act Country

Reported by Neil Anderson, Managing Editor

A new mutual fund shop just cropped up in Connecticut, with what it claims is an industry first: an actively-managed, open-end mutual fund designed specifically to invest in public Business Development Companies (BDCs).

Andrew Kerai of Full Circle Advisors confirms that the Greenwich-based shop just launched its first mutual fund, the BDC Income Fund. They're even teaming up with what Kerai describes as "a wholesale marketing partner" (name not yet revealed) to help "scale this fund in the retail channel."

The fund is part of Atlantic Fund Services' Forum Funds II series trust. Foreside handles distribution, while Union Bank does custody. Kerai is the lead PM for the fund, which offers institutional, A and C shares.

Full Circle traces its routes back to the founding of a sister operation back in 2005 by John Stewart. Eventually Stewart launched Full Circle Capital, his own BDC. Last Goldman Sachs veteran Gregg Felton joined the BDC as co-CEO and joined the RIA (Full Circle Advisors) as managing member and chief investment officer. Then this summer Kerai, a former sell-side and buy-side analyst, came on board.

"I joined ... in July with the purpose of launching a means of accessing the public BDC markets in active management," Kerai tells MFWire. "We settled on an open-end mutual fund."

The public BDC market includes about 46 BDCs, Kerai says, with about $35 billion in assets in total. (The Full Circle Capital BDC is excluded from the new mutual fund's investing universe.) Yet for investors who wanted an actively-managed strategy that invested in BDCs, he says, "there really wasn't an answer out there." Full Circle's strategy for its new fund is "to find the best relative value in the BDC market," Kerai explains. There is mis-pricing in the BDC space, he says, but it "the sector overall offers a compelling opportunity."

"We are bottom-up, long-only investors," Kerai says.

Looking ahead, Kerai expects Full Circle and its marketing ally to spend the next three to six months "getting the plumbing in place" in the retail channel, getting on RIA and regional broker-dealer platforms and the like. Only then will they look towards the tougher gates, like those at the wirehouses. 

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