BLACKSTONE is “doubling down” on opportunities in its international credit business, as it targets growth in a broader array of debt including local-currency investments, according to the firm’s global credit head.
“There’s a lot more to do for us in Europe and in Asia,” Gilles Dellaert, global head of credit & insurance at Blackstone, said. “We want to ensure that we are of the same scale and breadth everywhere around the world.”
Blackstone is expanding into private investment-grade credit, a US$25 trillion to US$50 trillion market opportunity that includes asset-backed financing beyond corporates, according to Dellaert. The world’s largest alternative asset manager has been ramping up growth in its debt business as investors pour more cash into the booming US$1.7 trillion private credit market, attracted by higher yields and extra spreads over public markets.
Blackstone’s credit and insurance business, which had about US$330 billion of assets under management at the end of June, delivered the firm its biggest gains in the second quarter, results showed last week. Fees earned in the segment climbed 29 per cent and profit available to shareholders surged 51 per cent as Blackstone took in higher flows and cashed out of more bets.
The company said in April that it hired Morgan Stanley’s former global head of securitised products trading, Dan Leiter, to be head of its international credit and insurance business. Blackstone’s direct lending business globally totals about US$120 billion, and the asset manager is targeting Asia as a US$5 billion lending platform in the near term after deploying about US$1 billion every year to the region since 2022, according to the company.
Private credit has its origins in financing more highly levered companies, and Blackstone lends to more than 2,000 non-investment-grade borrowers. But global peers including Apollo Global Management and Carlyle Group are also increasingly looking to expand into investment-grade debt.
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Many investors with large high-grade government and corporate debt holdings want to put more into private credit where they can pick up an additional 150 to 200 basis points in spread, according to Dellaert.
Blackstone’s clients tend to have multi-currency portfolios, and “domestic is always top of mind” for them, so the firm will do more local-currency deals ahead, he said.
“We have done a lot of financing in our existing business in Australia and we started to see opportunities out of our team in Singapore,” Dellaert said. “If we find yen-denominated deals, I’m sure our Japanese clients would love to take them alongside us in the same way that they currently invest with us in US dollars and in euros.”
More scrutiny
Still, the rapid expansion of private credit is also drawing greater scrutiny from regulators as the segment has grown to compete with banks in providing loans, raising concerns of potential systemic risks.
The International Monetary Fund in its April global financial stability report encouraged authorities to “consider a more intrusive supervisory and regulatory approach to private credit.” The European Union is also pushing to bring more transparency in the market, with the bloc agreeing in February on new requirements for what private credit investment funds have to disclose.
In contrast, Blackstone’s Dellaert said private credit is reducing financial-system risk by better matching borrowers’ term-funding needs with holders that have compatible investment horizons.
“We have always said we view this as being healthy for the financial system,” he said. Clients “want us to source assets that are effectively matched”. BLOOMBERG
