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 it would pay that much in stock to acquire HPS Investment Partners, a firm run by three ex-employees of Goldman Sachs (GS) and JPMorgan Chase (JPM) that specializes in lending money to riskier companies.
“Private markets are no longer a separate or standalone exposure for investors,” BlackRock CEO Larry Fink told analysts during an investor call on Tuesday morning. “The blending of public and private in today’s reality is a part of the entire market of today.”
BlackRock’s stock was up roughly 1% Tuesday morning.
Private credit — which accounts for all debt that is not issued or traded publicly — is a loosely defined market that mushroomed over the past decade due in large part to higher interest rates and regulations that forced banks to retrench from their own leveraged lending.
The market is now worth roughly $1.6 trillion compared with $41 billion in 2000, according to Preqin. The sum is still small compared to the total loans held by US banks — over $12.5 trillion.
BlackRock, which oversees $11.5 trillion in assets, and other money management giants have been making aggressive expansions into these private markets and, in some cases, teaming up to compete for that business.
One such alliance is between Citigroup (C) and Apollo Global Management (APO), which have announced a $25 billion private credit fund focused on direct lending. It is the biggest lending partnership yet between a private financial institution and a big bank. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
JPMorgan CEO Jamie Dimon is among those who have raised some concerns about private credit’s growth, arguing that it creates more opportunities to let risks outside the regulated banking system go unmonitored.
“I do expect there to be problems,” Dimon said at a Bernstein industry conference at the end of May, adding that “there could be hell to pay” if retail investors in such funds experience deep losses.
The HPS deal is BlackRock’s third sizable acquisition in 2024, and all involved 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.
