T. Rowe Price taps Oak Hill for alternative credit fund

T. Rowe Price has launched a Flexible Credit Income Fund in partnership with Oak Hill Advisors, bringing Oak Hill’s multi-strategy credit approach to Australian investors for the first time.

The Flexible Credit Income Fund, “OFLEX AUD”, has been launched as an Australian unit trust aimed at wholesale investors looking to diversify into alternative credit markets.

Using Oak Hill Advisor’s multi-strategy approach, it aims to target income by lending primarily to large-cap companies across a wide range of industries, predominantly in the United States.

Built as a diversified strategy, the fund invests up and down the capital structure across both private and public credit markets, including direct lending, junior capital solutions, asset-based lending, collateralised loan obligations (CLOs), special situations and liquid credit.

According to the firm, this approach enables the investment team to target opportunities with “attractive risk-return profiles” during periods of market volatility, positioning the fund as a complementary addition to existing portfolio allocations.

Commenting on the launch, Melbourne-based partner and portfolio manager at Oak Hill Advisors, Adam Nankervis, said the fund leverages the firm’s three decades of expertise in credit selection, structuring and risk management - particularly noting its commitment to downside protection and capital preservation.

“We believe the current backdrop, with secular tailwinds for private markets and the challenges from an uncertain rate environment, is creating exciting opportunities for flexible capital within alternative credit.

“Our dynamic approach allows us to capture these opportunities for our clients while maintaining a disciplined risk framework,” Nankervis said.

The launch marks the first-time Oak Hill’s multi-strategy credit approach will be made directly available to Australian wealth clients, having historically been reserved for institutions.

Distributed by T. Rowe Price with Channel Investment Management Limited as issuer and responsible entity, the fund will be available to both Investor Directed Portfolio Service (IDPS) and superannuation accounts.

Darren Hall, T. Rowe Price’s country head for Australia and New Zealand, noted that the fund stands apart from many local private credit offerings, which tend to be heavily concentrated in real estate and higher-risk property development. In contrast, Hall said, its broad sector exposure provides a more diversified approach.

“This disciplined diversification is designed to help mitigate sector-specific risks, while enhancing portfolio resilience for Australian investors,” he said.

Hall added that the launch reflects growing demand for “sophisticated alternative credit solutions” among advisers and family offices.

“By combining [Oak Hill Advisers] OHA’s renowned alternative credit investment expertise with T. Rowe Price’s established distribution network, we aim to expand access for high-net-worth Australian investors to diversify their portfolios with high-quality alternative credit.

“This partnership underscores our commitment to providing advisers and their clients with innovative investment options and local expertise, helping them navigate a changing market environment,” he said.

Managing approximately US$108 billion in alternative credit assets globally, Oak Hill Advisors was acquired by T. Rowe Price in December 2021 to accelerate its expansion into alternative markets.