Investor Focus Drives Growth at Franklin Square

Franklin Square Capital Partners (FSCP), founded in 2007 in Philadelphia, has rapidly grown to be known as an industry leader in direct investments. Co-Founded by Michael Forman and David Adelman, the duo of industry veterans immediately focused on providing retail investors opportunities typically only afforded to institutions. 

Simply offering an institutional like investment to the retail market wasn’t enough. FSCP set out to be a pioneer of change for the better. They launched the first non-traded Business Development Company (BDC) in 2009 allowing individual investors access to debt and equity securities of private U.S. companies.

Not only have they offered a new investment opportunity to the independent broker dealer (IBD) space, they have committed to industry best practices, complete transparency, mark-to-market pricing, and significant sponsor investment in its products, often referred to as ‘skin in the game.’ Lastly, they have pledged to not fund distributions with offering proceeds or borrowings, a common practice of non-traded REITs.

Since 2009, FSCP has sponsored four funds; three BDCs and just recently, a closed end fund providing credit to mid- and large-cap European companies. Each of these is sub-advised by GSO Capital Partners LP, a private debt asset manager and the credit platform of The Blackstone Group, L.P., a leading alternative investment manager. Across these four funds, FSCP manages $9.2 billion. 

In 2013, FSCP raised just over $3 billion in capital from individual investors, placing it third in the Direct Investment industry in terms of inflows. In 2012, they took in just over $2 billion. Capital raising efforts are lead by their affiliate broker dealer FS² Capital Partners LLC (FS²) through the IBD channel. 

Clearly advisors and investors like what they see and experience with FSCP to invest over $5 billion in the past two years. This commitment to do right for the investor seems to be paying off. 

However, raising capital is not the goal of FSCP; providing retail investors access to institutional quality alternative investments that limit risk and offer above market returns is. FSCP has certainly done so. 

FS Investment Corporation, its first non-traded BDC, raised roughly $2.8 billion before closing in May of 2012 and was paying an annualized distribution rate of 8.47% as of December 4, 2013. Sponsor commitments were $13.8 million.

FS Investment Corporation II, launched in June of 2012, has quickly raised $2.2 billion in assets as of October 29, 2013 and is paying an annualized distribution rate of 7.2%. Sponsor commitments were $28.6 million.

Lastly, FSCP’s third non-traded BDC, FS Energy and Power Fund, has raised $1.6 billion in capital and is paying an annualized distribution rate of 6.10%. Sponsor commitment thus far is $30.2 million.

FSCP’s success has earned many awards and recognition from the likes of Forbes, Ernst & Young, and The Philadelphia 100.

In 2012, FSCP was ranked the third fastest growing, privately held company in the Philadelphia region by The Philadelphia 100.

Michael Forman, CEO of FSCP, commented on the ranking, “We are proud of the growth Franklin Square has achieved since the firm was founded in 2007 and honored to be recognized by The Philadelphia 100. As we continue to grow it is essential that we maintain our entrepreneurial spirit and culture. Innovating and doing what is right for investors will always be ingrained in how we do business.”

The entrepreneurial spirit and culture, coupled with a continued focus on innovation and doing what’s right for investors paid off in 2013 earning the #13 spot on Forbes Magazine’s list of America’s Most Promising Companies, which identifies 100 privately-held, high-growth companies with a promising future.

“We’re honored to receive recognition from Forbes for our rapid growth and future potential,” said Michael Forman, Chief Executive Officer of Franklin Square Capital Partners. “We have talented folks and great partners committed to our mission of providing our investors access to investment strategies and asset managers traditionally available only to very large institutions and the like.”

Also in 2013, Michael Forman earned the top spot in the Ernst & Young Entrepreneur of the Year® 2013 Award in the Philadelphia area. While this was an individual award, Mr. Forman is quick to note the recognition is a testament to the work of his team and focus on the investors.

“We have worked hard at Franklin Square to provide our investors access to asset classes, strategies and world-class asset managers that were once available only to the world’s largest institutional investors, such as university endowments, pension funds and foundations,” said Mr. Forman. “While I am certainly honored to receive this recognition, I credit the entire Franklin Square team for its innovative spirit and steadfast commitment to our investors.”

Seven years after launching FSCP and five years after the launch of the industry’s first non-traded BDC, Mr. Forman and FSCP’s commitment to innovation, entrepreneurial spirit, and doing right by the investor is as strong as ever. The company continues to innovate, recently launching a closed end fund, FS Global Credit Opportunities Fund, which provides investors access to debt facilities of mid- and large-cap European companies.

With innovation and growth, comes the need for new, talented employees. FSCP is currently looking to fill half a dozen or so positions on the distribution team of FS². 

In a statement to The DI Wire, FSCP commented, “Having launched our first fund in 2009 with fewer than fifteen employees, we are proud and excited to be where we are today with more than $9 billion in assets under management and more than 180 employees. We continue to grow in all aspects of the firm, including in our distribution group. Lance Murphy, the president of FS2 Capital Partners, Franklin Square’s broker dealer, is growing our distribution team to meet the demand for our funds. We place great emphasis on promoting from within our ranks and are adding new staff at all levels of our distribution team. We are selective, have a thorough vetting and hiring process, and put our colleagues through extensive, ongoing training. We want our distribution teams to be the best educated in the business so we can provide superior client support and protect our investors.”

Michael Gerber, Managing Director, Administration and Public Affairs, added, “We seek to hire smart, hard working, hard charging and ethical employees. That’s part of our culture here at Franklin Square, where we are building a world class team that does right by our clients and investors.”

Mr. Gerber himself could be described as smart, hard working, hard charging, and ethical. A graduate of the University of Pennsylvania and Villanova University School of Law, cum laude, served on the Pennsylvania House of Representatives for eight years and six as trustee of the state’s State Employee Retirement System, a $25 billion pension fund. He held various posts while in public office including chair of the Pennsylvania House of Democratic Campaign Committee among others. Just prior to joining FSCP in 2012, Mr. Gerber practiced law at Drinker Biddle & Reath LLP. 

At FSCP, Mr. Gerber oversees many areas including human resources, internal communications, and fund director relations.

As he is just one of the many talented individuals on the FSCP team, Mr. Gerber also oversees the team charged with recruiting the next class of smart, hard working, hard charging, and ethical employees.