BlackRock, the world's largest money manager, is close to making a $12 billion deal to buy HPS Investment Partners, a firm that specializes in lending to riskier companies. The deal would take BlackRock deeper into the private credit market, which has grown to $1.6 trillion from $41 billion in 2000. The move is part of BlackRock's expansion into alternative assets, following its recent purchases of Preqin and Global Infrastructure Partners. The private credit market has raised concerns among some, including JPMorgan CEO Jamie Dimon, who warns of potential risks and unmonitored opportunities outside the regulated banking system.
BlackRock ( BLK ) is close to making a $12 billion bet that would take it deeper into the hottest trade on Wall Street : private credit.
The world’s largest money manager is discussing a deal to buy 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.
The transaction of $12 billion or more could be announced as soon as this week, according to reports in the Financial Times and Bloomberg . The deal could also still fall apart.
BlackRock's stock was down slightly in Monday morning trading.
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 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.
If BlackRock completes the deal to buy HPS, it will be its third sizable acquisition in 2024. All involve 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.
The purchase of HPS would give BlackRock a bigger platform to go after a slice of the private credit market.
It was founded by three former Goldman employees, Scott Kapnick, Scot French, and Mike Patterson, who started HPS 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 backed away from riskier loans due to tighter regulations imposed in the aftermath of the 2008 financial crisis.
As of September, HPS managed $148 billion in assets.
David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on X at @DsHollers .