JPMorgan Chase & Co. is in talks to clinch $2.5 billion to $3 billion of third-party commitments to grow its private credit strategy, according to people with knowledge of the matter.
The New York-based lender has cast a wide net as it seeks to raise cash — targeting sovereign wealth funds, pensions, endowments, alternative asset managers and others. It’s received the most interest from credit managers that already invest in corporate debt but have limited access to private dealflow, the people said.
Discussions with investors are ongoing and details may still change, the people added, asking not to be named discussing a private transaction. Terms could be finalized in the coming weeks, they said.
The biggest U.S. bank has received a lukewarm reception from some deep-pocketed investors while seeking money to augment more than $10 billion of balance sheet cash it has dedicated for private credit deals, according to the people familiar with the situation. Hesitancy from some investors stemmed from the fact that JPMorgan wouldn’t have a fiduciary responsibility, and instead would be balancing the needs of itself, its partners and borrowers, the people said.
Large established private credit investors have also expressed little interest in the initiative amid concerns over fees and control, Bloomberg reported in December.
JPMorgan plans to originate loans, retain a small chunk of each financing, and syndicate the rest of the debt to its partners, the people said. The bank is seeking commitments of at least $500 million from some investors, one of the people added.
A representative for JPMorgan said the bank’s private credit strategy has received significant interest from investors, particularly in recent weeks.
As the private credit market has ballooned to roughly $1.6 trillion globally, firms including Apollo Global Management Inc. and Blackstone Inc. have amassed huge sums of investor cash, allowing them to offer borrowers favorable terms for buyouts and line up larger deals. That’s cut into the profitability of banks’ leveraged finance desks, prompting JPMorgan and others to set up direct lending operations of their own.
Starting off with around $3 billion of investor money would be a modest next step for the bank after setting aside $10 billion of balance sheet capacity for the effort.
The goal for many banks is to be able to seamlessly provide a private credit option to borrowers along with more conventional forms of financing such as high-yield bonds and leveraged loans. Leveraged buyouts, where private equity firms buy and sell companies, drive much of the corporate debt market, and the sponsors are a key client base for investment banks.
