Banks Want In on Private Credit

Just from first principles it is weird that, if you are a company or a private equity sponsor looking to borrow a lot of money, and you go to a gigantic bank like J.P. Morgan Chase & Co., the bank will say “yes, I would be happy to help you find that money.” Whereas if you go to an alternative asset manager like Blue Owl Capital or Ares Management Corp., the alternative asset manager will pull out a bag with a dollar sign on it and say “yes, here is money.” If you asked the average person “who has more money, JPMorgan Chase or Blue Owl,” they would probably say “I guess the biggest bank in America has more money than a company I have never heard of.” Also they would be right! JPMorgan has $4 trillion of assets; Blue Owl manages about $174 billion.

And yet from the perspective of a private equity sponsor, JPMorgan is in the business of intermediating loans: When you go to a big bank to get financing for a leveraged buyout, the bank will work with you to market the debt and find investors to buy it; you don’t expect the bank to buy most of the debt itself.1 Whereas Blue Owl is in the business of providing loans: You go to a private credit manager because you expect it to just hand you the money. Obviously it too is an intermediary — that money doesn’t just belong to Blue Owl; that money is in funds that it manages on behalf of other investors — but it can give you the money much more directly.