BlackRock Makes a $12B Bet on Private Credit

Well, well, well, BlackRock is at it again. The world’s largest asset manager has just sealed a deal to acquire HPS Investment Partners for a startling $12 billion. If you’re wondering what makes this such a big deal, buckle up! This isn’t just another acquisition; this is a strategic power play aimed at bolstering BlackRock's foothold in the rapidly growing private credit market. Let’s break it down and see why this move could redefine BlackRock’s future.

The Rise of HPS

Before we dive into the deal itself, let’s take a moment to appreciate how far HPS Investment Partners has come. Founded in 2007 by Scott Kapnick, the former head of investment banking at Goldman Sachs, HPS didn’t exactly start at the top. Originally part of Highbridge Capital, a JPMorgan-backed entity, HPS experienced its share of twists and turns. But as banks retreated from riskier lending post-crisis, HPS saw an opportunity and seized it, finding its niche in private credit, especially mezzanine and junior debt—areas that offer bigger returns. By 2016, they had crossed the $50 billion mark in assets under management (AUM), and today, that number has skyrocketed to nearly $120 billion, cementing HPS as a key player in the private credit space.

A Bold Bet on Private Credit’s Future

So, why would BlackRock spend $12 billion to buy a private credit firm? Simple: Private credit is booming. BlackRock, already managing a massive $11.5 trillion in assets, is keen to get a larger slice of the rapidly expanding $2 trillion private credit market, which is expected to grow to $3 trillion by 2028. CEO Larry Fink has repeatedly highlighted that alternative assets are where the future is. By acquiring HPS, BlackRock gains not only a strong foothold in this market but also a seasoned team that has mastered lending to riskier companies and offering higher returns through junior debt. This is a market that’s attracting huge institutional interest from insurers, pension funds, and others looking for higher yields than traditional bonds can provide.

BlackRock’s Big Move into Private Credit

This deal is just the latest in BlackRock’s larger strategy to dominate the private credit sector. The firm has already been busy with its $12.5 billion purchase of Global Infrastructure Partners, and now with the $12 billion acquisition of HPS, BlackRock is doubling down. Its vast client base, which includes insurance companies and pension funds, is a perfect fit for this high-yield, high-risk lending space. BlackRock plans to leverage HPS’s expertise in mezzanine debt and other forms of private credit, providing more investment options to its institutional clients. In addition to its U.S. expansion, BlackRock has also been eyeing high-growth international markets. For instance, in India, BlackRock is in advanced talks with Jio Financial Services to form a joint venture that could reshape the private credit landscape there. And as the private credit market continues to grow, don’t be surprised if BlackRock makes even more moves to solidify its position. “BlackRock’s large installed base of insurance client assets offers a prime opportunity to cross-sell HPS’s capabilities,” said Ana Arsov, global head of private credit at Moody’s.

What’s Next for Private Credit?

Private credit is no longer just a niche market; it’s quickly becoming a mainstream investment vehicle. The post-2008 financial crisis regulatory environment made traditional bank lending less appealing, so firms like HPS jumped in. And now, as banks retreat even further from the lending business, private credit has become a valuable alternative. “We’re going to be a huge force in both public and private markets shaping the next decade for financing solutions,” Kapnick said. With BlackRock doubling down on private credit, we’re likely to see an even more lucrative space for investors looking for higher yields. With this acquisition, BlackRock is ensuring that it’ll not only keep up with competitors like Apollo and Blackstone but potentially pull ahead.

A Match Made for the Future

In the end, this $12 billion acquisition isn’t just a deal—it’s BlackRock positioning itself to lead in the world of private credit. With HPS now under its wing, BlackRock has secured a stronger presence in one of the fastest-growing sectors in finance. The firm is setting itself up to offer more lucrative opportunities for institutional investors looking for higher returns. As the demand for alternative credit grows, BlackRock is ready to lead the charge in shaping the future of private credit. Stay informed and inspired—subscribe to MY CPE ONE for expert insights and actionable tips delivered right to your inbox!