BlackRock Inc. is revamping its private credit division as it aims to enhance its presence in the rapidly expanding market, which has seen significant competition from other firms. The company is establishing a new unit called Global Direct Lending, appointing Stephan Caron, who leads the European middle-market private debt sector, as its head. Jim Keenan, the global leader of BlackRock’s private debt unit, and Raj Vig, the co-head of US private capital, are both set to leave the firm next year.
Despite managing $10.6 trillion in assets, BlackRock remains behind smaller competitors like Apollo Global Management and Ares Management in the burgeoning private credit space. Rich Kushel, head of portfolio management at BlackRock, emphasized that private credit is a key focus for the firm. He stated that the new structure will promote collaboration and enhance the firm’s capabilities while adhering to its specific investment processes.
The formation of the direct-lending unit responds to growing investor demand and aims to bolster BlackRock’s aspirations of becoming a leader in global direct lending and growth debt. This move is part of the firm’s broader strategy to revitalize a business segment that has gained traction on Wall Street. Competitors such as Apollo, Blackstone, and KKR have diversified into direct lending, significantly growing their portfolios in the process.
Larry Fink, BlackRock’s CEO, has identified private credit as a crucial growth area, with predictions indicating that the global private debt market could reach $3.5 trillion by 2028. Currently, BlackRock manages approximately $35 billion in direct lending assets, representing a small fraction of its total assets, while competitors have much larger credit asset bases.
The restructuring aligns with BlackRock’s efforts to expand its stake in private assets, having managed $138 billion in illiquid assets as of June 30, which accounted for a significant portion of the firm’s revenue. The company aims to increase its annual revenue from private assets to around $2 billion by 2028.
In pursuit of this goal, BlackRock has been active in acquisitions, including the recent purchase of Global Infrastructure Partners for $12.5 billion and the alternatives data provider Preqin. The firm also acquired Kreos Capital last year and formed a partnership with Partners Group to create model portfolios for affluent retail clients.
Following Keenan’s appointment in May 2023 to oversee various private debt strategies, Phil Tseng will take over as the sole head of the US Private Capital business, while Dan Worrell will join as co-CIO of the new unit.