Apollo Global Management and Goldman Sachs Asset Management LP are preparing to launch private credit funds aimed at wealthy European investors, trying to capitalize on a burgeoning corner of the credit market.
The firms are developing strategies to target affluent individual investors interested in private lending for leveraged buyouts in the region, according to people with direct knowledge of the matter, who asked not to be identified as the information is private. Arcmont Asset Management is also exploring a similar idea, according to some of the people. The moves would follow a similar fund started by Blackstone Inc. last year.
Representatives for Apollo and Arcmont declined to comment. Goldman Sachs declined to comment on any specific product.
The $1.4 trillion private credit market is growing at breakneck speed as direct lenders look to replace bank underwriters on larger and larger leveraged buyout financings. Buffered from volatile markets, private debt boomed as successive rate hikes and economic uncertainty stymied traditional debt options for borrowers last year. Data provider Preqin expects the asset class to reach $2.3 trillion by 2027.
Padideh Raphael, global head of the retail client business at Goldman Sachs Asset Management, said in an emailed statement that “enabling individual investors to access the diversification and performance benefits of private markets is a major focus” of the firm.
Apollo has also talked about its strategy to target individual lenders with various funds, including in alternative assets. “We’re launching our European product platform in the coming months designed to offer a full suite of options to individuals in Europe,” co-president Jim Zelter said on the asset manager’s earnings call this month.
Moves by Apollo, Goldman and Arcmont will follow Blackstone, which launched a Luxembourg-based private credit fund aimed at wealthy European investors — the first of its kind — last year.
Unlike traditional private credit vehicles for institutional investors where capital is locked up for a specific period of time, Blackstone’s fund for individuals is run as an on-going perpetual vehicle. Other direct lenders are eying a similar structure.
Regulations and complexity have meant that the private market has been mostly closed off to individuals in Europe until recently, but investors have long been able to participate in US private credit through business development companies. So-called BDCs, which are typically run as publicly traded closed-end funds, tend to provide direct loans to small firms that are seen as too risky to get debt from traditional banks.
Blackstone created a novel type of non-traded BDC for wealthy individual investors in the US two years ago, modeled after its popular real estate strategy.
Called BCRED, the fund amassed $37.8 billion in over a year but started seeing an increase in redemptions at the end of last year as the threat of recession and concerns about corporate defaults hit demand for riskier assets. The fund allows investors an option to redeem a portion of their money — up to 5 percent of the fund’s total assets per quarter.