Strengthening Leadership in the Private Credit Market
BlackRock, the world's largest asset manager, has announced its decision to acquire HPS Investment Partners, a leading private credit firm, for approximately $12 billion. This all-stock transaction, set to close in mid-2025, is a strategic move to strengthen BlackRock’s presence in the rapidly expanding private credit market, an asset class that has gained significant attention in recent years. The deal will create a combined private credit franchise worth around $220 billion in client assets, helping BlackRock capture a larger share of the burgeoning private debt market, expected to surpass $4.5 trillion by 2030.
Private credit, which involves non-bank institutions lending directly to businesses, has flourished due to stricter regulatory frameworks that make it more expensive for traditional banks to offer high-risk loans. As traditional financial institutions pull back from riskier lending, private credit firms like HPS have capitalized on the opportunity. HPS, founded in 2007 and originally a division of JPMorgan’s Highbridge Capital Management, now manages $148 billion in assets, making it one of the largest independent firms in the private credit space. The firm has developed a diversified portfolio across senior debt, asset-based finance, real estate, and private placements, offering flexible capital solutions to companies of all sizes.
Alliance for Integrated Market Solutions
By acquiring HPS, BlackRock not only strengthens its credit and financing capabilities but also integrates HPS’s specialized origination platform, which is underpinned by a scalable and flexible capital base. The combined entity will offer a comprehensive range of services that blend BlackRock’s expertise in public fixed income with HPS’s private credit solutions. The aim is to deliver a seamless approach for clients seeking both public and private income solutions, enhancing the management of portfolios with diverse income-generating assets.
Larry Fink, BlackRock's CEO, emphasized that the acquisition positions the firm to offer clients a broader range of services that combine public and private market investments. The deal is seen as a response to the growing demand for private capital, especially as institutions such as insurance companies, pensions, and sovereign wealth funds look for higher yields and more customized investment solutions. By bringing HPS into the fold, BlackRock aims to become a major player in the private credit market, directly competing with other alternative asset managers like Apollo Global Management and Blackstone, which have significantly larger private credit portfolios.
HPS’s leadership team, including co-founders Scott Kapnick, Scot French, and Michael Patterson, will remain in charge of the new private financing solutions unit within BlackRock. These leaders will also join BlackRock’s global executive committee, signaling a commitment to maintaining the operational independence and strategic vision that has driven HPS’s success. This leadership continuity is crucial for the integration of the two firms, ensuring that the specialized knowledge and client relationships that HPS has cultivated will continue to thrive under BlackRock’s broader platform.
Accelerating Growth and Diversified Revenue Streams
For BlackRock, the acquisition will expand its private markets fee-paying assets under management by 40% and increase management fees by approximately 35%. These higher-margin, private-market investments will boost BlackRock’s revenue potential, as private assets typically generate far higher fees than its traditional exchange-traded funds (ETFs) and passive investment strategies. This focus on private markets reflects Fink’s ongoing efforts to diversify BlackRock’s revenue streams, moving beyond the low-margin world of passive investment management into more lucrative sectors like private equity, credit, and real estate.
This acquisition follows a series of strategic investments by BlackRock in 2024, including its $12.5 billion acquisition of infrastructure investment firm Global Infrastructure Partners (GIP) and the impending $3.2 billion purchase of private markets data provider Preqin. With these moves, BlackRock is positioning itself to offer a comprehensive suite of solutions to institutional clients, from public equities to alternative private assets. By combining expertise across these sectors, BlackRock is positioning itself as an integrated platform that can offer clients a full range of investment opportunities in both public and private markets.
However, the deal comes at a time when BlackRock’s stock performance has been somewhat subdued in comparison to its competitors in the alternative asset space. While BlackRock’s shares have risen by 25.7% in 2024, firms like Apollo Global Management and Ares Management have seen far larger gains, partly driven by the private credit boom. Despite this, analysts view the HPS deal as a major step forward in cementing BlackRock’s role as a leader in the private markets, which will be crucial as demand for private credit continues to grow.
Long-Term Growth
The integration of HPS is expected to be accretive to BlackRock’s earnings per share in the first full year post-close, and the deal structure, which includes a portion of the consideration paid in five years and potential performance-based additional payments, ensures alignment between BlackRock’s long-term goals and HPS’s leadership team. Moreover, the deal will be financed with BlackRock equity, a move that underscores the firm’s confidence in the future growth prospects of the private credit market.
This acquisition reflects a broader trend in the financial industry, where large asset managers are increasingly focusing on private markets to diversify their portfolios and meet the evolving needs of institutional investors. BlackRock’s acquisition of HPS is a pivotal moment in this shift, positioning the firm to capitalize on the structural growth in private credit and offering clients an integrated, innovative set of solutions to navigate both public and private investment opportunities.
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