BlackRock Executive Sees Opportunities for Large Firms Amid Credit Market Volatility

Private Credit Industry Faces Turmoil as Big Players Gain Advantage

The private credit industry is facing significant turmoil, with $1.8 trillion in assets at risk due to writedowns, rising defaults, and bets on the software sector being upended by AI. BlackRock Inc.'s Scott Kapnick, CEO of HPS Investment Partners, stated that the biggest players in the industry are well-equipped to navigate this period, while smaller lenders may struggle to keep up.

BlackRock Inc.'s acquisition of HPS Investment Partners for $12 billion is a key part of the company's strategy to expand its private credit business. BlackRock is investing heavily in the sector, with over $25 billion allocated to private credit and infrastructure. This move aims to capitalize on the growing demand for private credit among institutional and retail investors.

Private credit executives are facing increasing scrutiny from investors, who are seeking reassurance on the resilience of the industry. Kapnick identified several areas of difficulty, including:

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• Smaller borrowers vulnerable to the triple threat of tariffs, labor costs, and higher interest rates
• Software businesses that are vulnerable to disruption by AI
• Overpriced investments in the software sector, particularly in the 2021-2022 vintage

The industry's biggest players, including Blue Owl Capital Inc. and Blackstone Inc., are facing a wave of withdrawals from retail investors, with their shares experiencing their worst start to a year in a decade.