BLACKROCK is overhauling its private credit business as the world’s largest asset manager races to catch up to competitors in the booming market.
The firm is setting up a new division, Global Direct Lending, appointing Stephan Caron, head of the European middle-market private debt business, to lead it. Jim Keenan, the global head of BlackRock’s private debt business and a two-decade company veteran, will leave the firm next year, as will Raj Vig, co-head of US private capital.
While BlackRock oversees US$10.6 trillion, it sits outside the top bucket in the booming private-credit markets and lags behind smaller firms such as Apollo Global Management and Ares Management that have dominated.
“Private credit is one of the firm’s top priorities,” Rich Kushel, head of BlackRock’s portfolio management group, said in a memo on Monday (Sep 16). “This new structure will increase collaboration and alignment as we expand and develop our capabilities while maintaining the discreet investment processes that underpin each franchise.”
The direct-lending unit is being set up after increasing demands from investors, Kushel said, and to “help accelerate our ambition to be a leader in direct lending and growth debt globally”.
This is BlackRock’s latest step to reboot a business that has become one of Wall Street’s hottest investments. Apollo, Blackstone and KKR have expanded far beyond their roots in leveraged buyouts and private equity into direct lending and asset-based finance, while Ares, HPS Investment Partners and Sixth Street have gotten rich off private credit in recent years.
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BlackRock chief executive officer Larry Fink highlighted private credit as a “primary growth” driver, while the firm’s own estimates show that direct lending will expand dramatically. The company’s head of macro credit research, Amanda Lynam, predicted the global private debt market would roughly double to US$3.5 trillion by 2028, one of the most bullish calls on the growth of the industry.
BlackRock manages about US$35 billion of direct lending assets, which is about 0.3 per cent of the US$10.6 trillion the firm oversees. It manages US$86 billion of private debt. Apollo touts more than US$500 billion of assets in credit, and Ares had more than US$320 billion in credits assets as at Jun 30.
For BlackRock, best known for capitalising on a decade-long wave of flows into its stock and bond index funds, the leadership shuffle is part of its push into the lucrative world of private assets. While the US$138 billion in illiquid assets it managed was only about 1.3 per cent of the total firm’s assets as at Jun 30, it represented about 6.4 per cent of the firm’s overall revenue from management and performance fees in the second quarter.
The company aims to double its annual revenue from private assets to about US$2 billion by 2028.
As part of that effort, BlackRock has gone on a buying spree, announcing acquisitions this year of Global Infrastructure Partners for US$12.5 billion and alternatives data-provider Preqin. The firm purchased Kreos Capital, a private debt shop in Europe, last year and announced a partnership this month with Partners Group Holding to set up model portfolios of private assets for wealthy retail clients.
Keenan was tapped in May 2023 with overseeing private debt, which includes private credit, direct lending and distressed investing strategies, as well as infrastructure and real estate debt. He was previously chief investment officer of credit in the company’s alternatives business and led the firm’s public market credit and leveraged finance business.
Phil Tseng, who has co-led the US Private Capital business since 2021, will become the sole head, while Dan Worrell will become co-CIO of the unit, according to the memo. BLOOMBERG
