APOLLO Global Management has created a new private credit fund that will invest money from an affiliate of Mubadala Investment and other institutional investors for no fee during the first year and waive half of the fees the following year.

The fund is structured as a business development company, and typically such vehicles tend to offer few to no fee breaks to its pool of retail and high net worth investors.

Mubadala and an affiliate of Apollo have contributed more than US$290 million into the fund, which has over US$790 million in assets, according to a filing on Friday (Mar 15). The rest of the assets were purchased through the use of leverage.

The new fund, known as Middle Market Apollo Institutional Private Lending, is part of an existing relationship between the asset manager and Mubadala, the Abu Dhabi sovereign wealth fund. The firms agreed to work together in 2020 and have teamed up on several ventures, including a US$2.5 billion private credit platform last year.

With seed commitments totalling US$450 million as of Mar 15, the new fund will invest as much as 70 to 80 per cent in loans to US middle market companies, generally defined as companies with less than US$75 million in earnings before interest, taxes, depreciation and amortisation, the filing showed.

A representative for Apollo declined to comment.

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There is also a provision that if the fund doesn’t double its investment commitments to US$900 million in five years, Apollo will distribute the cash received from sale or loan repayments back to investors, the filing said. Typically, BDCs can re-invest those proceeds in perpetuity.

Fees to the investment adviser, when in full effect, include a 1 per cent management fee and a 12.5 per cent incentive fee after achieving a 6 per cent hurdle rate, according to the filing.

Mubadala added Fabrizio Bocciardi – its head of credit investments – to the fund’s board, the filing showed. Howard Widra, who is the chair of the board, also serves as Apollo’s head of direct origination and executive chairman of Midcap Financial Investment Corporation, one of Apollo’s BDCs open to high net worth investors. BLOOMBERG