Avenue Capital Group and other credit managers are looking to the U.S. public capital markets to raise assets for permanent capital vehicles.

On October 19, 2010, a registration statement was filed with the Securities and Exchange Commission by Avenue Income Credit Strategies Fund (the “Fund”), a newly organized closed-end investment company, that proposes to make a public offering of its shares. The Fund, which has registered as an investment company under the Investment Company Act of 1940 (the “1940 Act”), will be advised by affiliates of Avenue Capital. Shares of the Fund will be listed for trading on a U.S. stock exchange.

The primary investment objective of the Fund is to seek a high level of current income, with a secondary objective of capital appreciation. It will pursue this objective by opportunistically investing in credit-related instruments, including investment grade and high-yield loans and debt instruments and derivatives. The Fund can use leverage as part of its investment program by borrowing money or issuing preferred stock in an amount up to one-third of its total assets. It will pay an asset-based investment advisory fee determined as a percentage of its total assets (including assets obtained through leverage). The Fund will not pay any performance-based investment advisory fee.

The Avenue Capital filing reflects the willingness of a well-known credit manager to seek permanent capital in the U.S. public market. Shortly after this filing was made, another well-known credit manager made a similar filing. These are examples of private investment fund managers using 1940 Act registered investment funds to deliver their investment program to a broader investor base.

Schulte Roth & Zabel is a leader in structuring registered investment companies (including closed-end funds, mutual funds and interval funds) that pursue alternative investment strategies, and has assisted numerous clients in developing novel 1940 Act registered products and business development companies. The partners in our Registered Funds practice group represent more than 200 registered funds, business development companies, their boards of directors or investment managers.