World’s largest active asset manager joins private debt craze

US asset manager Capital Group is partnering with private equity giant KKR to launch a series of hybrid funds blending public and private assets, in a move that marks the USD 2.5 tn manager’s foray into the alternative investment sector, the Wall Street Journal reports. The first two funds — to be launched next year — will comprise 60% public bonds selected by Capital and 40% private credit assets held by KKR, targeting “mass-affluent investors,” who hold assets ranging between USD 100k-1 mn.

Private credit is all the rage: With major players like Ares Management and Apollo Global Management expanding their portfolios with private debt investments, this interest in the USD 1.7 tn private credit industry has surged in recent years, prompting other investors and banks to ramp up their investments in private credit.

More investment powerhouses want to capitalize on the sector: Although talks to acquire Chicago-based private credit firm Monroe Capital last year had stalled, JPMorgan is looking to purchase another private credit firm to “bolster its private capital business,” Bloomberg reports, citing sources familiar with the matter. JP Morgan has earmarked over USD 10 bn of its balance sheet to direct lending and is in the process of tapping asset managers to collaborate on private credit transactions

The downside? The market is a bit too bullish: With dry powder — money earmarked for private credit funds which has not been deployed — currently at an all-time high, the private credit market is witnessing a “supply-demand imbalance,” as private credit funds are being met with lackluster demand from buyout firms, Bloomberg reports. Additionally, lenders are pushing to offer “one of the most aggressive financing terms ever seen in the market.”

REMEMBER- The UAE has caught the private credit bug: In February, sovereign wealth fund Mubadala agreed with Goldman Sachs to co-invest USD 1 bn in private credit in the Asia-Pacific region. The wealth fund also took on the role of anchor investor for a private credit fund set up by Starz Real Estate and targeting European property in November 2023 and had a tie-up with Alpha Dubai to set up a USD 2.5 bn JV to co-invest in global credit.

The Abu Dhabi Investment Authority (Adia) also ventured into private credit in September, backing Wells Fargo’s USD 5 bn fund and making a USD 932 mn investment in Australian real estate private credit firm Qualitas Diversified Credit Investments. It also committed USD 1 bn to Barclays and AGL Credit Management’s new private credit fund in April, and agreed to boost its commitments to London-based alternative asset manager Cheyne Capital’s capital solutions strategy to GBP 650 mn.

MARKETS THIS MORNING-

Asia-Pacific markets fell early Friday, tracking Wall Street declines on concerns around higher-for-longer rates, with the Nikkei down 1.25% and the Kospi 1.05% lower. Wall Street futures are little changed from yesterday.

THE CLOSING BELL-

The DFM fell 0.8% yesterday on turnover of AED 349.1 mn. The index is down 0.9% YTD.

In the green: National International Holding Company (+14.8%), Al Salam Bank (+2.4%) and du (Emirates Integrated Telecommunications Company) (+1.9%).

In the red: Dubai National Ins. & Reins. (-10.0%), International Financial Advisors (-9.8%) and Al Salam Sudan (-6.6%).

Over on the ADX, the index closed down 0.9% on turnover of AED 1.2 bn. Meanwhile, Nasdaq Dubai fell 1.8%.