J.P. Morgan Chase is in the hunt to buy a private credit firm to augment its $3.6 trillion asset management arm, as the biggest U.S. bank makes more inroads into Wall Street’s buzziest sector.
The J.P. Morgan unit is seeking a private credit shop that could bolster its private capital business, according to people familiar with the matter. As part of the effort, the company held talks to buy Chicago-based Monroe Capital this year, but the two firms ultimately decided not to pursue a deal, the people said, asking not to be named describing private discussions.
Spokespeople for J.P. Morgan and Monroe declined to comment.
Interest in the $1.7 trillion private credit industry has exploded in recent years. Alternative asset titans such as Ares Management and Apollo Global Management have poured money into ever-larger deals for their portfolios. Other investors, as well as banks themselves, are also keen to make more wagers.
J.P. Morgan’s investment bank has already earmarked more than $10 billion of the firm’s balance sheet for direct lending. The bank is also putting together a partnership with asset managers to join it in private credit deals, Bloomberg previously reported.
The asset management unit, which handles money for wealthy people and institutions, including endowments and pension funds, is seeking to grow its private credit offerings. It managed $17 billion in private credit assets at the end of last year — less than the nearly $19 billion in committed and managed capital that Monroe had as of April 1.
For a direct lender, selling to a big bank could have implications for its franchise. The business would jump from a less-regulated corner of the financial industry to one that is subject to stringent rules and a patchwork of overseers. With that in mind, some private credit lenders have erred toward partnering with banks instead of combining with them.
While banks’ forays into private credit have the potential to leave them competing with their own traditional lending desks, it’s also a way to boost asset management fees and offer borrowers a range of options as tighter capital rules limit their lending in other areas. Proponents of private credit say that some borrowers prefer dealing with a few direct lenders rather than arranging a loan with a bank that can then be sold off to dozens of other firms.
‘Working on that’
A takeover would help J.P. Morgan’s asset management arm beef up quickly, but the company might ultimately decide to grow its private credit offerings organically, one of the people said.
At an investor day May 20, senior J.P. Morgan leaders discussed Wall Street’s focus on the sector and J.P. Morgan’s efforts to build up a franchise on multiple fronts. The firm must “find a way on the fiduciary space, as we are finding in the non-fiduciary space, to get into private credit,” said Daniel Pinto, president and chief operating officer. He added that Mary Erdoes, longtime CEO of asset and wealth management, and her team are “working on that.”
CEO Jamie Dimon had a different take: “We are not going to buy a private capital company,” he said in response to a question on the topic — only to quickly take it back.
His top deputies “should be thinking all the time, regardless of what I say,” Dimon said. “I mean that. I have an opinion, but if they came in and said we have a great thing that makes sense for us, then yeah, fine, we should do it.”
