Medley Management (NYSE: MDLY), a publicly traded asset management firm with approximately $5.3 billion of assets under management, is launching a $1 billion interval fund called Sierra Opportunity Fund, according to a preliminary prospectus filed with the Securities and Exchange Commission.
Sierra Opportunity Fund plans to invest a majority of its assets in a portfolio of cashflow collateralized loan obligations, comprised primarily of senior secured loans made to companies whose debt is rated below investment grade or, in limited circumstances, unrated. The company seeks to obtain exposure across a range of underlying borrowers and credit ratings, sectors, regions, CLO collateral managers, and CLO maturity profiles.
CLOs are investment vehicles that own a broadly assorted pool of senior secured loans where payments are pooled together and passed on to different classes of owners in various tranches.
Sierra Opportunity Fund registered 40 million shares of common stock, and intends to offer three classes of shares: Class A shares, Class T shares, and Class I shares, but will only offer class T shares until it is granted exemptive relief from the SEC to issue multiple share classes.
Class A shares have a public offering price of $26.88 each and a front-end sales load of 7 percent, comprised of a 5 percent dealer allowance and a 2 percent dealer manager fee. The minimum initial investment by a shareholder for Class A shares is $2,500 for regular accounts or $1,000 for retirement plan accounts.
Class T shares will be offered for $25.51 each and include a 2 percent front-end load, comprised of a 0.75 percent dealer allowance fee and a 1.25 percent dealer manager fee. Class T shares are charged a 0.75 percent annual distribution fee that is capped at 7.25 percent. The minimum initial for class T shares is $2,500 for regular accounts and retirement plan accounts.
Class I shares are priced at $25.00 and have no front end sales load, but will be charged a 0.50 percent annual distribution fee that is capped at 6.25 percent. The minimum initial investment for class I shares is $2 million.
The fund is sponsored by Medley LLC, an affiliate of Medley Management Inc. SOF Advisors LLC, an affiliate of Medley Management, serves as the funds adviser and will manage the investment portfolio. Through Medley, the adviser is currently staffed with more than 80 employees.
The dealer manager was not yet disclosed in the preliminary registration documents, but SC Distributors serves as the DM for Medley’s other offerings, including the recently launched Sierra Total Return Fund.
The fund intends to offer a 5 percent repurchase of its outstanding shares on at least an annual basis.