Blackstone Inc. raised $32.6 billion of cash last year for a new private-credit fund amid red-hot demand for the growing asset class that offers higher yields and interest payments that rise as inflation jumps.
The firm’s Blackstone Private Credit Fund, an unlisted business development company that launched in January 2021 and mainly invests in first-lien loans, delivered a 12.4% total net return last year, according to its website. That far exceeds the market return for leveraged loans of 5.2% in the same period, though the BCRED fund generated additional returns in part by investing borrowed money alongside investors’ equity.
Blackstone is among several large lenders in the roughly $1 trillion private-credit market who’ve been offering products like BCRED for individuals to invest in loans to midsized companies which banks have been reluctant to do.
Higher returns, of course, typically mean higher risks. Among them for investors choosing an unlisted BDC instead of a leveraged loan mutual fund is the lower liquidity — the unlisted BDC investors can’t always get their money returned to them when they want to.
Still as private lenders have gotten bigger, and the cash they’ve attracted has also grown, the firms have also been writing bigger checks, competing with Wall Street banks to fund leveraged buyouts.
BCRED was a lender in 19 loans of $1 billion or more in 2021, according to a statement. Those deals included a $2.65 billion loan to Guidehouse Inc., a provider of public sector consulting services, and a $2.6 billion loan to Inovalon Holdings Inc., a cloud-based services firm to the healthcare industry, according to the firm’s website.
“We believe we are well positioned for what could be an inflationary, rising rate environment,” said Brad Marshall, chief executive officer of the BDC, in the statement.
Other direct lenders seeking more individual investors for their funds include Apollo Global Management Inc., which set up a new company earlier this year, and HPS Investment Partners, which has $1.2 billion to invest from a new private BDC called HPS Corporate Lending Fund.
Of the $32.6 billion of cash raised by BCRED in 2021, $15.8 billion was equity commitments from investors, and the rest was borrowed money. That surpassed the $15.4 billion raised by HPS in September, of which $11.7 billion was secured through equity commitments.
