Behind the Yield

The Founding Distributor

By Charles Urquhart, CFA · April 13, 2026

Here is something that has been bothering me for several weeks.

One of the largest non-traded BDCs in America – HLEND, which is owned by BlackRock, raised $5.9 billion through a single distribution firm, which has never once been identified by name in any public document or filing.

Not in the four years that HLEND has been active. Not in the two reports that it published. Not in a single press release from HPS or BlackRock.

All they mention is the Founding Distributor.

When I tried to find out who this was, I came up empty.

On the launch of HLEND on February 3, 2022, the offering documents made it clear that there were four share classes available.

Three classes followed the normal structure for non-traded BDCs.

Class I shares had no distribution fee and were sold to institutions.

Class D shares had a 0.25% annual trail and went to fee-based advisors. Class S shares had a 0.85% annual trail and were for commission brokers.

The fourth class, Class F, had a 0.50% annual trail and was available from exactly one distribution firm in the country.

The offering documents specifically stated that this firm was "the participating broker with whom the Fund was launched on an exclusive basis in 2022" and referred to this as the Founding Distributor in every single document thereafter. They did not name the firm.¹

The N-2 registration statement said that Class F shares would be purchased by "fee-based wrap accounts managed by the Founding Distributor, or clients that have 'alternative fee arrangements' with the Founding Distributor."²

What this means is that the Founding Distributor's broker-dealer collects 0.50% of the distributions made to the client every single year. Class D advisors performing the same services for the same fund collect only 0.25%.

The Founding Distributor negotiated double the trail that every other fee-based advisor receives within this fund. In exchange for having the exclusive right to distribute the fund at its launch.

This deal was not disclosed to the fund's investors in their account statements.

The shares of Class F are still being sold. The trail is still being collected. Today.

Now, before I get to the numbers, let me address something directly.

Why does it matter that we don't know who they are?

There are legitimate reasons a firm might not be named in a distribution agreement. Let me give you a few.

Distribution relationships in alternative products are often treated as proprietary. If you have built an exclusive channel, you don't want your competitors knowing who it is.

The distribution agreement itself may contain a confidentiality provision. The Founding Distributor may have required anonymity as a condition of the deal.

And HPS's lawyers would argue -- correctly -- that the material terms are all disclosed. The fee, the exclusivity, the share class mechanics. The identity of the counterparty is not legally required.

These are reasonable arguments. I accept them.

Here is what they don't account for.

If you don't know who the Founding Distributor is, you cannot ask whether your own advisor has a financial relationship with them. The disclosure that is supposed to protect you requires knowing who you are being protected from.

A Reg BI obligation requires advisors to evaluate whether a recommendation is in the client's best interest. If the advisor doesn't know their broker-dealer is the Founding Distributor, they cannot factor that into the analysis.

Competitive sensitivity explains not naming them at launch. It does not explain four years of silence across multiple prospectus updates, two annual reports, and a $12 billion acquisition by the world's largest asset manager.

When BlackRock acquired HPS in July 2025, they filed new documents and had every opportunity to bring transparency to an arrangement that predated their ownership.

They didn't.

After four years and $5.9 billion, there are two possible explanations for why this firm has never been named. One is innocent. One is not. I will let you decide which category this falls into.

On the launch date, HLEND sold 20,437,880 shares. 12,095,600 of those were Class F shares.³

Fifty-nine percent of the initial offering of HLEND went to one firm. One exclusive firm.

Class S shares did not exist at the time of the offering. They would not become available until twenty months later.⁴

The Founding Distributor was the only seller in the market at the time of the offering.

In 2022, $6.642 million in distributions were extracted by Class F fees.⁵ In 2023, another $13.137 million in distributions were extracted by Class F shares.⁵ That is $19.8 million in two years for a company with no public identity.

In March 2026, HLEND had raised $5.9 billion in capital through the sale of 236,344,839 Class F shares.⁶

At 0.50% of $5.9 billion, that is how much money the Founding Distributor collected in fee-based income in the first two years of HLEND's existence.

Now here is something else that bothers me about this.

On the date of the initial offering of HLEND, it broke escrow and Class F shares began trading.

Six days later, on February 9, 2022, The Guardian Life Insurance Company of America announced that they had taken a minority equity stake in HPS Investment Partners. This was described as a strategic partnership.⁷

The Guardian Life Insurance Company of America owns Park Avenue Securities. Park Avenue Securities is a wholly owned, dual-registered broker-dealer and registered investment adviser for The Guardian Life Insurance Company of America. It has around 2,400 financial professionals working for it and manages over $50 billion in client assets. They have fee-based advisors who collect distribution trails from the BDCs that they manage.

I am not suggesting that Park Avenue Securities is the Founding Distributor.

What I am saying is that six days elapsed between the first Class F trade and the public announcement of a strategic equity partnership between HPS and the parent company of one of America's largest dual-registered broker-dealers.

I present to you this fact and ask that you draw your own conclusions.

Now, here are a couple of alternative explanations, which, admittedly, are more innocuous in nature.

The F in Class F most likely stands for "Founding" as a way of indicating that this is the share class that comes with the highest distribution trail and is given to the company that commits to launching a fund. This is a common practice and does not indicate any wrongdoing.

The fact that Guardian acquired a stake in HPS may not be related to HLEND and its distribution. Guardian also acquired a significant stake in a private credit company in 2022. This acquisition fit into that strategy.

Yes, both of these alternatives are plausible.

What neither one explains is why the identity of the Founding Distributor does not show up in any of the SEC filings between 2022 and 2025.

When HLEND raised $5.9 billion, it did so through an exclusive distribution agreement with an anonymous firm.

This is a fact.

In 2019, the SEC went after 79 investment advisory firms. These firms were placing their advisory clients into higher-cost share classes of mutual funds, even though there was a cheaper share class available. None of this was disclosed to the client. The 79 firms collectively returned $125 million to investors.

The violation that occurred in each firm in 2019 was: a cheaper share class was available to the investor, the investor went into the higher-cost share class, and the firm took the difference in cost.

The mutual fund case had been brought under the Investment Advisers Act, which governs registered investment advisers. This case involves a BDC and its broker-dealer registered under Reg BI. The framework is, therefore, different. The fact that the SEC pursued $125 million in enforcement actions in the mutual fund case indicates that the SEC considers the higher-cost share class to be a priority. The BDC version of this activity, though, remains unregulated.

$5.9 billion raised. $19.8 million in fees collected in two years by the Founding Distributor. One firm. No mention of the name of the company in any public document.

If you know who the Founding Distributor is, I would very much like to hear from you.

Show me the incentive. I will show you the outcome. -- Charlie Munger

1. HLEND N-2 Registration Statement, March 2023; 10-K fiscal years 2023 and 2024. "Class F shares are generally available for purchase in this offering only through the participating broker with whom the Fund was launched on an exclusive basis in 2022 (the 'Founding Distributor')."

2. HLEND N-2 Registration Statement, March 2023. Plan of Distribution section.

3. HLEND 10-K, fiscal year ended December 31, 2022. Cover page share count; Consolidated Statement of Changes in Net Assets.

4. HLEND Performance page (hlend.com): "Class S commenced operations on October 1, 2023."

5. HLEND 10-K, fiscal year ended December 31, 2023. Notes to Financial Statements -- Distribution and Servicing Plans. Class F: $13,137,000 (2023), $6,642,000 (2022).

6. HLEND Form 8-K, filed March 27, 2026. Status of Offering table: Class F Common Shares, 236,344,839 shares, $5.9 billion total consideration.

7. Guardian Life Insurance Company of America and HPS Investment Partners joint press release, February 9, 2022. "Guardian Life Acquires Strategic Minority Stake in HPS Investment Partners."