BlackRock private credit push tests HPS merger gains now

BlackRock private credit ambitions now rest on HPS after a volatile first year together. The deal gives the asset manager scale, but also fresh pressure.

The world’s largest asset manager is trying to turn its $12 billion purchase of HPS Investment Partners into a durable edge in a private credit market that has become both larger and harder to manage. The combined unit, known as Private Financing Solutions, gives BlackRock a broader platform for lending across company sizes and layers of the capital structure.

HPS changes BlackRock’s scale

BlackRock announced the HPS transaction in December 2024 after years of seeking a stronger position in direct lending. HPS brought a franchise known for private loans to companies, while BlackRock added a global client base and wider corporate relationships.

Company filings cited for the business show that the acquisition helped lift fee-paying private credit assets to more than four times their earlier level. The combined private credit footprint is now described at about $151 billion, giving BlackRock a bigger seat in a direct lending market valued at roughly $1.8 trillion.

The strategic logic is clear: bigger borrowers and more complex projects often require lenders that can commit large sums, underwrite credit risk and coordinate with equity capital. BlackRock’s argument is that HPS gives it the credit engine it previously lacked at scale.

Withdrawal limits reveal strain

The first year has not been clean. BlackRock’s older private credit operation, built around loans to small and medium-size companies, faced pressure as Justice Department prosecutors were reported to be examining its practices.

The scope, timing and possible outcome of that examination were not detailed in the source material, so it should be treated as an unresolved risk rather than a finding of wrongdoing. For BlackRock, the issue is operational as well as reputational because HPS executives have spent time reviewing loans made before the merger.

Retail fund pressure added a second challenge. In March, the HPS Corporate Lending Fund applied a 5% limit on withdrawals as investors sought cash, a step that several competitors later also used.

Withdrawal gates can protect remaining investors by slowing forced asset sales, but they also test confidence in funds marketed to wealth clients. If investors believe access to cash is less flexible than expected, fundraising can become harder even when the underlying loans continue to pay.

Meta points to financing bundles

BlackRock’s strongest counterpoint is that the enlarged platform is already pursuing deals that would have been harder before HPS joined. This month, HPS and Global Infrastructure Partners, another BlackRock acquisition, were selected by Meta Platforms Inc. as partners on a data center project.

That assignment places BlackRock closer to the model used by large private markets rivals such as Apollo Global Management Inc., Blackstone Inc. and Blue Owl Capital Inc. The appeal is the ability to pair infrastructure equity with private credit underwriting for companies financing energy-intensive digital projects.

Alex Blostein, a senior analyst at Goldman Sachs Group Inc., said the market rewards firms with breadth. You need to have a very large investor base to be relevant, and you need a large-scale infrastructure equity player and a credit underwriter, he said.

Blostein said BlackRock paid a high price for HPS, which may have weighed on its stock, but added that the deal lets the firm compete in areas previously out of reach. He said BlackRock is now capable of what only a handful of firms in the world can do — and they wouldn’t have been able to be there before.

BlackRock’s chief financial officer, Martin Small, has told analysts the firm sees incredible opportunities in private credit. A company spokesperson declined to comment for the source article.

If redemption pressure eases and older loan reviews do not produce larger problems, BlackRock can use HPS and Global Infrastructure Partners to win more large corporate financings. The global macro effect would be more nonbank capital flowing into infrastructure and corporate borrowing, while BlackRock would gain fee scale and the private credit sector would become more concentrated among firms with multiple financing tools.

If investor withdrawals persist or legal scrutiny expands, the mechanism runs the other way. BlackRock could spend more time defending fund liquidity and legacy underwriting, the sector could face tougher distribution conditions, and the macro channel would be tighter private financing for smaller borrowers that rely less on banks.

A third path depends on whether the Meta data center project becomes a repeatable template. If large technology and infrastructure borrowers keep seeking combined equity-and-credit packages, BlackRock’s model gains strategic value; if those projects slow, HPS remains valuable but less transformative for the wider private markets race.