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JPMorgan Chase said it would set aside $50 billion to lend to risky companies backed by private equity firms as it promotes it to the booming private credit market.
The largest U.S. bank said it has allocated $50 billion of its capital and paid $1.5 billion from other investors to lend directly to the company and bypass the traditional debt market.
JPMorgan launched a direct lending driver in 2021 and has so far deployed $10 billion in more than 100 private credit transactions.
The announcement comes as traditional Wall Street lenders want to strengthen their products with nearly $200 million in private credit asset class, which has been Great growth.
Many of JPMorgan’s biggest competitors have announced partnerships with private credit funds. Late last year, Citigroup announced a $25 billion partnership with Apollo Global Management, which followed a joint venture between Wells Fargo and Asset Manager Centerbridge.
Others, such as Goldman Sachs and Morgan Stanley, have turned to their wealth and asset management sectors, which are dedicated to investing in the industry.
JPMorgan CEO Jamie Dimon said the work gives corporate clients more options and flexibility to the banks they already know and see in their communities, and Known there in all market environments”.
Dimon told investors last year that private credit “has some real offers” because it allows for long-term financing, rather than raising funds through joint bonds and loans, usually provided. However, he criticized how the industry priced loans on books and said bad actors could cause problems.
JPMorgan has worked so far with seven asset managers on its private credit work, including Cliffwater, FS Investments, Octagon Credit Investors, Shenkman Capital Management and Soros Fund, according to one person who covered the matter. Management . Executives hope to add other managers in the coming months to boost their firepower.
The bank’s decision to use its balance sheet was partly due to its sale of HPS Investment Management in 2016 as one of the largest private credit players. The top JPMorgan Chase leader at the time invested with little interest in the department. The department added regulatory scrutiny prompted the founders of HPS to buy the business.
In the following years, asset classes exploded, and private credit funds drew hundreds of millions of dollars from insurance companies, pensions and sovereign wealth funds. Private credit loans are usually higher than bank loans, but can make borrowers more flexible.
The money allows managers such as Ares Management, Blue Owl Capital and Apollo Global Management to write $1 billion in loans, creating competitors for the traditional high-yield bond and leveraged lending market. HPS agreed to sell itself to BlackRock for $12 billion last year.
When the market grabs in 2022, private credit becomes one of several ways acquisition groups provide funding for acquisitions, taking away market share and lucrative expenses from Wall Street banks. Drawing from this experience, banks hope to provide their own financing solutions.
As the credit markets gather in 2023 and 2024, immediate pressure on banks to provide private credit loans has been reduced. Banks have provided several private credit loans for several private credit loans in the United Market, and Dimon noted that last year “private credit spent more money in most areas”.
“This has been changing,” he added.
