BlackRock (BLK) just made a $12 billion bet that will take it deeper into the hottest trade on Wall Street: private credit.
The world’s largest money manager announced Tuesday that it would pay that much stock to acquire HPS Investment Partners, a company run by three former employees of Goldman Sachs (GS) and JPMorgan Chase (JPM) that specializes in money lending to riskier companies.
“Private markets are no longer a separate or standalone position for investors,” BlackRock CEO Larry Fink told analysts during an investor call Tuesday morning. “The mixing of public and private in today’s reality is part of the entire market today.”
Shares of BlackRock were up about 1% Tuesday morning.
Private credit – which includes all debt that is not publicly issued or traded – is a loosely defined market that has grown explosively over the past decade, largely due to higher interest rates and regulations that forced banks to cut back on their own leveraged lending.
According to Preqin, the market is now worth about $1.6 trillion, up from $41 billion in 2000. The amount is still small compared to the total loans of US banks – more than $12.5 trillion.
BlackRock, which oversees $11.5 trillion in assets, and other money management giants have aggressively expanded into these private markets and in some cases teamed up to compete for that business.
One such alliance is between Citigroup (C) and Apollo Global Management (APO), which announced a $25 billion private credit fund focused on direct lending. It is the largest lending partnership to date between a private financial institution and a major bank. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
Jamie Dimon, CEO of JPMorgan, is among those who have raised some concerns about the growth of private lending, arguing that it creates more opportunities for risks outside the regulated banking system to go unchecked.
“I do expect there will be problems,” Dimon said at an industry conference in Bernstein in late May, adding that “there could be hell” if retail investors in such funds suffer big losses.
The HPS deal is BlackRock’s third major acquisition in 2024, all marking a deeper push into alternative assets.
Earlier this year it agreed to buy London data provider Preqin for $3.2 billion and private equity firm Global Infrastructure Partners for about $12.5 billion.
The purchase of Global Infrastructure Partners, which closed in October, was a bet on growing demand for new energy, transportation and digital infrastructure projects in the coming years.
HPS gives BlackRock a larger platform to capture a share of the private credit market, making BlackRock one of the best private credit managers in the world. It also gives BlackRock roughly $600 billion in alternative assets, putting it in the same category as Apollo and KKR.
HPS was founded by three former Goldman employees, Scott Kapnick, Scot French and Mike Patterson, who started the company in 2007 as a private equity and credit division within JPMorgan Chase’s asset management unit.
HPS separated from the bank through a buyout in March 2016, as JPMorgan retreated from riskier lending due to stricter regulations imposed in the wake of the 2008 financial crisis.
As of September, HPS managed $148 billion in client assets.
BlackRock and HPS will form a new private financing solutions business unit led by Kapnick, French and Patterson. These three men will all join BlackRock’s executive committee. Combined, the two companies would have a private lending franchise overseeing $220 billion in assets.
“Today marks an important milestone in our quest to become the world’s largest provider of private financing solutions,” said Kapnick, CEO of HPS. “Our partnership with BlackRock will further strengthen our position in this fast-growing but increasingly competitive market.”
One big opportunity from the combination is the chance to cross-sell HPS private credit products to “BlackRock’s large customer base of insurance clients,” Ana Arsov, global head of private credit at Moody’s Ratings, said in an emailed comment.
The companies expect the deal to close in mid-2025 “subject to regulatory approvals and customary closing conditions.”
David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on X @DsHollers.
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