Federal prosecutors have initiated an investigation into BlackRock’s publicly traded private-credit fund, TCP Capital Corp (TCPC), following a series of significant asset write-downs and deteriorating financial performance. The probe, which centers on the management and valuation practices of the fund, marks a critical escalation in regulatory scrutiny of the rapidly expanding private-credit sector.
Context and Market Background
Private credit has surged in popularity since the 2008 financial crisis, filling the void left by traditional banks that retreated from corporate lending. BlackRock, the world’s largest asset manager, significantly bolstered its presence in this space through its 2024 acquisition of Global Atlantic and its integration of Tennenbaum Capital Partners, the original manager of TCPC.
TCPC functions as a Business Development Company (BDC), a structure designed to provide retail and institutional investors access to debt financing for middle-market companies. However, recent quarterly filings reveal that the fund has struggled with non-accrual loans and downward adjustments to the fair value of its portfolio holdings.
Details of the Regulatory Inquiry
The investigation primarily focuses on how the fund determines the fair value of its illiquid assets. Unlike stocks traded on public exchanges, private credit assets often lack transparent market pricing, requiring managers to rely on internal models and subjective estimations.
Data from recent filings indicate that TCPC’s net asset value (NAV) has faced persistent pressure, prompting concerns among investors regarding the accuracy of reported asset health. Analysts at KBW have noted that the BDC sector is currently grappling with a cycle of credit normalization, where higher interest rates are testing the resilience of borrowers who took on leverage during the era of near-zero borrowing costs.
Expert Perspectives
Financial analysts suggest that the scrutiny of BlackRock’s fund reflects a broader trend of federal agencies tightening oversight on alternative asset managers.
