Exclusive-Morgan Stanley plans to double private credit portfolio to $50 billion
By Tatiana Bautzer and Saeed Azhar
NEW YORK (Reuters) — Morgan Stanley's asset management division aims to double its private credit portfolio to $50 billion in the medium term as it gathers funds from large investors to loan out to companies.
The bank has invested more than $300 million into the business, which has already gathered about $25 billion in total assets from mainly institutional investors, David Miller, Morgan Stanley's global head of private credit and equity told Reuters in an interview.
«The vast majority of new capital will continue to come over the next decade from our institutional clients,» Miller said. Institutional investors such as sovereign wealth funds and insurance companies hold two thirds of the current portfolio and wealthy individuals account for the rest, he said.
Miller estimates the broader private credit market has grown as large as $2 trillion.
The extension of private credit, of which direct lending is a key part, has increased since the financial crisis as stricter regulations made it more expensive for banks to finance risky loans for debt-ridden companies.
Activity has surged in the last two years. As banks' capital got tied up in risky loans and interest rates rose, groups of banks were able to provide less financing via traditional syndicated loans. Private lenders such as Ares Management (NYSE:ARES), KKR and Blackstone (NYSE:BX) swept in.
Still, Wall Street banks have found ways to participate in the new market by gathering money for loans from investors instead of using their own balance sheets.
Goldman Sachs CEO David Solomon told analysts this month that the bank seeks to raise $40 billion to $50 billion in alternative funds this year. A large chunk of that will be
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