BLK

BlackRock's dominance in the global asset business got another confirmation. The institution, which has roughly $11.5 trillion worth of funds under management currently rules a $85 billion private credit platform as of the end of September, yet it is ready to buy one more private credit firm, named HPS Investment Partners, for about $12 billion in an all-stock deal, BlackRock CEO Larry Finksaid and HPS CEO Scott Kapnick said this week. Shares of BlackRock reached the levels above $1,050 on this news, as HPS is a bigger private credit player, with its assets under management evaluating at about $148 billion. Initially being founded in 2007 as a hedge fund unit of JPMorgan's asset management arm, the firm has quickly grown over the past few years, from nearly $34 billion in 2016.

HPS was reportedly approached by a number of interested institutions, which offered acquisition or merger instead of entering into IPO, but BlackRock came out the winner. The entire private credit class of assets is now estimated above $1.5 trillion, and it may grow to $2.6 trillion in the next 5 years, according to average analyst pool projections on Wall Street. Even though BlackRock's rivals Apollo, managing $598 billion in credit assets, Blackstone ($432 billion) and Ares ($335 billion) are still commanding bigger strides in this credit platform speciality, the deal will clearly strengthen BlackRock positions here by creating a private credit franchise with about $220 billion in client assets. According to some estimates, this may increase BlackRock's private markets fee-paying assets under management and management fees by 40% and about 35%, respectively.

As an investment institution, BlackRock previously emphasized that an expanding credit division could be its "primary growth driver" within alternative solutions in coming years. As CEO Larry Fink noted, the HPS deal helps to "deliver income solutions for our clients that blend both the best of the public markets and the best of the private markets". This "positions BlackRock to offer comprehensive alternative asset management portfolio services to the largest institutions in the world ... significantly advancing its private-market growth goals," Ana Arsov, global head of private credit at Moody's Ratings commented.

Many investors think in a similar way. As we saw BLK aiming for new mountains since the very beginning of 2024, now we can update our price target for $1,150 at least. When BLK share price was just a bit above $800 in early January, the pool of Wall Street analysts put their average target at $877, and it adjusted to $1,090 at the moment. A 30% price growth for the last 11 months looks like a reason to expect even better price dynamics. It seems that declining borrowing costs in both the U.S. and Europe along with the Christmas rally have a potential of another 3% to 5% increase for the leaders of the investment segment right in the coming weeks.