T. Rowe Price to Acquire Oak Hill Advisors

T. Rowe Price will make its first major foray into alternative strategies by buying private-credit specialist Oak Hill Advisors, or OHA, for a total of up to $4.2 billion, the fund family said Thursday. The deal for OHA, a $53 billion-in-assets manager of private-credit, high-yield, and structured-credit strategies, should close in 2021's fourth quarter.

The acquisition will give T. Rowe Price a foothold in alternatives markets to supplement its existing equity, fixed-income, and multi-asset business lines. While some of T. Rowe's strategies invest in private companies, the firm does not anticipate that it will incorporate private-market alternative strategies into its target-date fund series. 

Demand for OHA's alternative credit strategies has recently been stronger than for T. Rowe Price's predominantly equity- and fixed-income-oriented lineup. T. Rowe cites that OHA has raised about $19 billion in new capital since the start of 2020, which compares favorably to T. Rowe Price's reported $5.6 billion of net inflows in 2020 and $5.8 billion of net outflows through the first nine months of 2021. 

Other diversified asset managers, such as Vanguard and Virtus Investment Partners, have looked in recent years to alternatives to diversify lineups and shore up revenue squeezed by fee pressure in traditional asset classes.

T. Rowe Price had about $1.6 trillion of assets under management as of Sept. 30, 2021, so OHA will represent a small fraction of the firm's overall business. The fund family, however, plans to use OHA as a launching point for its alternatives ambitions, which include a commitment to provide $500 million for co-investment opportunities and seed capital alongside OHA investors. OHA will operate as a stand-alone business within T. Rowe Price, retain autonomy over its investment process, and maintain its team. OHA's founder and CEO Glenn August is expected to join T. Rowe Price's board of directors and management committee after the deal closes.