(Bloomberg) -- Blackstone Inc.’s European private credit fund for high net-worth individuals, ECRED, is set to reach €1.5 billion ($1.53 billion) by month’s end, a threefold surge over the past year.
The growth underscores the rise in retail involvement for the $432 billion Blackstone Credit & Insurance unit, one of the world’s largest private lenders, and shows momentum for a fund that was initially slow to catch on with European investors.
“Individual investors have the potential to become one of the primary sources of capital” for Blackstone’s European loans, Gilles Dellaert, global head of BXCI, Blackstone’s credit and insurance unit, said in an interview.
Blackstone is among industry giants sizing up individual investors as their next cash cow. Overall, high net-worth individuals account for about a third of investors in Blackstone’s global credit platform, though a fraction of that is down to those in Europe.
Goldman Sachs Asset Management, CVC Capital Partners, Ares Management Corp. and Carlyle Group are also channeling retail cash through products targeted to the wealthy rolled out after ECRED. Apollo Global Management Inc. and State Street Corp., meanwhile, want to bring private credit to investor masses through an exchange-traded fund this year.
Alternative asset managers expect that over the next three years, 23% of their investment will be sourced from retail, compared with the latest figure of 13%, according to a report last year by market researcher Cerulli Associates. Ares Chief Executive Officer Michael Arougheti said reaching retail investors is “a little bit of a holy grail” for the industry.
The potential in Europe is huge: the region hosts almost one-third of the world’s wealthy, those with $1 million to their name, UBS estimates show. Turning them into private credit investors has so far required patience and time, and the skill to navigate labyrinthine banking networks and tax codes.
“Roll-out of the retail strategy is more complex than in the US,” said Rashmi Madan, Blackstone’s senior managing director and head of EMEA Private Wealth Solutions. “The European continent is not the ‘United States of Europe.”’
ECRED connects to retail investors through a patchwork of banks, complicating the task. The fund had amassed just €240 million in the six months following its October 2022 launch.
Contrast that with the US, where the $61.8 billion Blackstone Private Credit Fund (BCRED) can call on wirehouses, retail brokers that act as middlemen between private credit funds and their end investors.
Access to cash presents another potential stumbling block for ECRED. Most of the European fund is invested in illiquid assets, with only a small buffer of loans that can be sold easily to meet payouts. As such, redemptions are capped to no more than 2% of the fund in a month or 5% every quarter.
For newcomers without a track record and relationships in Europe, it’s even harder. “You have to make the case to investors as to why they should invest in your fund versus the big names that they already know,” said Clair Pagnano, who advises asset managers at law firm K&L Gates.
Belgian Dentists
To reach individuals across Europe, Blackstone has partnered with banks including ING Groep NV, BNP Paribas SA, UniCredit SpA, Banca Generali SpA and S-Bank.
For example, the firm’s tie-up with ING is giving it a bigger foothold in Belgium — a nation the UBS report ranks fifth in terms of average wealth in Europe. Distributing marketing material in three languages and navigating Belgium’s convoluted tax system were just a few of the wrinkles they needed to iron out first.
Blackstone executives are hopeful that participation by individuals in Europe can rival the 30% share they get from retail worldwide.
“In Europe, we’re at an earlier stage of evolution in terms of retail commitments but a similar ratio could be reached in the coming years,” he said.
Deals
Software maker Databricks Inc. has clinched more than $5 billion of financing from lenders including Blackstone, Apollo, and Blue Owl in its largest debt raise to date
Blue Owl is leading a private credit transaction of roughly $4 billion for PCI Pharma Services in what would be one of the largest direct lending deals of the year
A Blackstone private credit fund has withdrawn a $500 million investment-grade bond sale that it launched Tuesday due to administrative delays
Natixis SA is preparing to launch two significant risk transfers later this year as banks expand the use of these transactions to gain regulatory capital relief
BMO Financial Group has entered a partnership with alternative asset manager Canal Road Group in a deal that will enable the latter to invest up to $1 billion in direct lending
Mars Inc. is borrowing the equivalent of $1 billion through privately-placed bonds as it begins to repay bank loans it took out to help buy foodmaker Kellanova
Direct lenders including Antares Capital, Blue Owl and KKR are preparing to take over insurance claims manager Alacrity Solutions, the latest restructuring in the private credit market
Fundraising
Arcmont is raising money for a new European direct lending strategy that won’t include an incentive fee
Ares has amassed a €30 billion pool of capital for its latest European direct lending fund, the largest of its kind ever in the region
Allianz Global Investors has raised €1.5 billion for a fund that buys private credit stakes on the secondary market
Mumbai-based Avendus PE Investment Advisors Pvt is launching a third private credit fund to raise as much as 40 billion rupees
Credit investor SC Lowy Financial HK Ltd will launch a new interval fund in mid-2025 which focuses on direct lending among other securities
Neo Asset Management, backed by venture company Peak XV Partners and MUFG, aims to raise as much as 60 billion rupees for its second private credit fund
King Street Capital is set to launch a new private credit fund, bolstered by an investment of about $70 million from Generali Investments
Job Moves
Goldman Sachs veteran Greg Olafson is leaving the firm to join merchant bank BDT & MSD Partners as president, co-head of global credit and co-chief investment officer
Private debt manager Kartesia has hired Benjamin Schall as head of the DACH region
Christian von Schimmelmann, former global co-head of the Goldman Sachs GP stakes arm, is starting a new venture with backing from Reinsurance Group of America and Sackville Capital
PAG, one of Asia’s biggest alternative asset managers, has hired Ben Hall from KKR & Co. in Australia to head up its Asia Pacific corporate credit lending business
Goldman Sachs promoted several key executives and combined teams to form a capital solutions group led by Pete Lyon and Mahesh Saireddy
Banco Bilbao Vizcaya Argentaria SA has hired UBS Group AG’s Americas head of structured credit and sustainable credit products, Estanislao Fidelholtz, as the Spanish lender seeks to expand its global markets footprint
Credit investor SC Lowy Financial HK Ltd. has laid off several staff members, according to the company’s chief executive officer, as the firm pivots away from trading public securities and toward private credit
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