According to Reuters, Morgan Stanley is looking to aggressively expand its private credit business, with plans to double its portfolio to $50 billion in the medium term.
The move highlights the continued growth and demand for private credit as an alternative to traditional bank lending.
Private credit provides loans directly to companies, filling a void left by banks constrained by regulations post-financial crisis.
Morgan Stanley is raising capital from large institutional investors like sovereign wealth funds and insurance companies to fund these private loans.
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- Morgan Stanley plans to double its private credit portfolio from $25 billion to $50 billion.
- The bank sees strong demand from institutional investors amid market growth to $2 trillion.
- The move reflects banks’ shift to private lending as regulations limit traditional corporate loans.
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Morgan Stanley Aims to Double Down on Private Credit to $50 Billion.
The private credit market has ballooned to an estimated $2 trillion as banks limit lending to riskier companies.
Firms like Ares Management, KKR, and Blackstone have capitalized on this opportunity.
Even Wall Street banks like Goldman Sachs and JPMorgan are getting in on the action – gathering investor money for private loans rather than using their balance sheets.
This allows them to participate in the high-growth private credit market while avoiding regulatory constraints.
Goldman Sachs aims to raise $40-$50 billion this year for alternatives like private credit.
JPMorgan has earmarked $10 billion of its own money for private loans and is soliciting outside investors.
Wells Fargo has also partnered with private equity firm Centerbridge to offer direct lending.
As the Federal Reserve is expected to cut rates, banks can offer cheaper financing, competing with private lenders who typically charge higher interest rates.
However, despite this headwind, private credit is still seen as an area of growth.
Morgan Stanley manages about $25 billion in private credit assets, up from $300 million after initial investment.
The bank expects continued growth in capital from institutional investors who hold about two-thirds of its existing portfolio.
Its 60 private credit bankers work alongside investment bankers to originate these corporate loans.
According to Jeff Levin, Morgan Stanley’s co-head of North America private credit, the loans target mid-size to large companies.
Even if syndicated bank loans become more competitively priced with lower rates, Levin believes private credit will grow among specialized niches like riskier middle-market loans.
As traditional banks remain constrained by regulation and rates decline, private credit is poised for rapid growth.
Morgan Stanley’s doubling on private loans signals confidence in this high-potential market.
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