On Tuesday, BlackRock announced its decision to acquire HPS Investment Partners, a move that underscores the asset manager’s growing focus on private markets.
BlackRock, managing a staggering $11.5 trillion in assets, continues its strategic shift towards private markets with its latest acquisition of HPS Investment Partners in a deal valued at approximately $12 billion. HPS, a significant player in private credit with $148 billion under management, marks yet another bold step for BlackRock in expanding its presence in this sector.
CEO Larry Fink is steering BlackRock closer to a major foothold in private-market investing. As the firm endeavors to diversify its portfolio, this acquisition could prove pivotal in achieving the scale akin to what BlackRock enjoys in public equities and bonds. The expected outcome is a 40% increase in private-market fee-paying assets and a 35% boost in management fees for BlackRock.
HPS, founded by former Goldman Sachs executive Scott Kapnick and his partners, has been instrumental in the private-credit surge post-2008 financial crisis. Its innovative model allowed it to fill the lending gap left by hesitant Wall Street giants. The merger promises to merge HPS’s expertise with BlackRock’s robust distribution network, enhancing service offerings to a global clientele.
This acquisition aligns with other strategic endeavors by BlackRock, such as its previous buyouts of Global Infrastructure Partners and Preqin. Notably, BlackRock’s private-credit business is projected to have $220 billion in client assets post-acquisition. The move is also expected to bolster relationships with long-term investors, particularly insurance firms looking for higher yields.
Martin Small, BlackRock’s CFO, highlighted the revenue potential of this acquisition, emphasizing the demand for private-equity and credit investments. This demand is particularly strong among pensions, endowments, and wealthy investors, who seek more lucrative returns than traditional funds can offer.
The growth trajectory for BlackRock is significant, with projections showing the private-debt market more than doubling to $4.5 trillion by 2030. Ana Arsov from Moody’s Ratings notes that this deal positions BlackRock among the top five private-credit managers, enhancing its growth capabilities in the private-market sector.
By acquiring HPS Investment Partners, BlackRock solidifies its strategic shift towards private markets, potentially transforming its position in the financial industry.
Source: Businessinsider
