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In today’s big story, we’re looking at a Wall Street giant jumping into one of the hottest sectors in finance.
What’s on deck:
But first, do you need some money?
The big story
Everybody’s a lender
AP Photo/Julia Nikhinson; Arantza Pena Popo/Insider
When you hear BlackRock, what’s the first thing that pops into your head?
Larry Fink? ETFs? ESG? Aladdin (not the movie)? Conspiracy theories?
The world’s largest asset manager wears many hats. Now it’s trying to add another to its $9.1 trillion wardrobe: lender.
BlackRock is the latest player pushing into the red-hot private credit market, writes Insider’s Rebecca Ungarino.
The business of lending directly to companies has become the topic du jour on Wall Street. Sky-high interest rates and stricter lending requirements from big banks created an opportunity for investment firms.
These so-called shadow banks can offer borrowers alternative forms of financing, albeit with some hefty interest payments.
But BlackRock’s private-credit ambitions have put the massive firm in uncharted waters, Rebecca writes, as it’s a small fish in a big pond.
The firm’s $81 billion private credit business is only a drop in the industry’s $1.75 trillion bucket. It’s also well behind larger players like Apollo, Blackstone, and KKR.
BlackRock’s Larry Fink. Spencer Platt/Getty Images
BlackRock’s private credit plans also add further validity to an industry on the rise.
One executive in the space told Rebecca that BlackRock’s entrance is a “stamp of approval” for the market.
And while everyone seems to want in on the action — private credit was the talk of the Greenwich Economic Forum last month — it’s unclear how that’ll ultimately impact the industry.
Lending is a complicated enough business on its own. Adding more competitors in a high-rate environment, without the shackles that regulate traditional banks, feels like a recipe for disaster.
Maybe I’m paranoid, but Wall Street’s history of investing in floating-rate debt structures shrouded in mystery isn’t pristine.
BlackRock’s cohead of US private capital said during a recent earnings call the firm was passing on more lending opportunities, citing deal terms without adequate lender protections.
But as more inexperienced players dive into the space, the probability of someone willing to lend to a borrower in need, regardless of the red flags, will rise.
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Aaron Schwartz/Xinhua via Getty Images
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3 things in business
Christian Northeast for Insider
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In other news
What’s happening today
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This post originally appeared in the Insider Today newsletter.