JPMorgan Chase & Co. is reportedly in advanced discussions to secure third-party commitments ranging from $2.5 billion to $3 billion to expand its private credit strategy, according to insiders familiar with the matter. The New York-based financial institution has actively reached out to various entities, including sovereign wealth funds, pensions, endowments, and alternative asset managers, in its quest to raise capital. Notably, credit managers already invested in corporate debt but seeking increased access to private deal flow have displayed the most interest.
While discussions with potential investors are ongoing, details remain subject to change, and terms could be finalized in the upcoming weeks, according to the anonymous sources. JPMorgan has encountered a lukewarm reception from some deep-pocketed investors in its efforts to bolster the more than $10 billion earmarked on its balance sheet for private credit deals. Concerns have emerged, with investors noting that JPMorgan’s role would lack a fiduciary responsibility, instead requiring a balance between its own interests, those of its partners, and the borrowers.
Large, established private credit investors have reportedly shown limited enthusiasm for the initiative due to apprehensions regarding fees and control. The bank’s plan involves originating loans, retaining a portion of each financing, and syndicating the remainder to its partners. It is actively seeking commitments of at least $500 million from select investors.
JPMorgan aims to tap into the expanding private credit market, which has reached approximately $1.6 trillion globally. Industry giants such as Apollo Global Management Inc. and Blackstone Inc. have accumulated significant investor capital, enabling them to offer favorable terms to borrowers for buyouts and larger deals. This shift has impacted the profitability of banks’ leveraged finance desks, prompting institutions like JPMorgan to establish their own direct lending operations.
With an initial target of around $3 billion in investor funds, JPMorgan’s foray into private credit represents a measured expansion, following its allocation of $10 billion in balance sheet capacity for this endeavor. The broader objective for banks, including JPMorgan, is to seamlessly provide private credit options alongside traditional financing avenues such as high-yield bonds and leveraged loans. Given the significance of leveraged buyouts in the corporate debt market, investment banks are keen on catering to this client base, comprising private equity firms engaged in buying and selling companies.
A representative for JPMorgan emphasized significant investor interest in the bank’s private credit strategy, particularly in recent weeks.
