NEW YORK (Reuters) - BlackRock Inc BLK.N, the world's largest asset manager, on Tuesday said it will buy investment manager Tennenbaum Capital Partners LLC (TCP), expanding its reach in the U.S. private credit market as investors hunt for richer fixed-income returns.
A deal for Santa Monica, California-based TCP, with some $9 billion in committed capital as of the end of 2017, makes BlackRock into a bigger player in private debt markets. The asset manager is better known for funds that invest in traditional bonds and publicly traded companies.
TCP is a specialized debt manager and its team of more than 80 people and partners will join BlackRock, according to a BlackRock statement that did not specify terms of the proposed deal.
The transaction is expected to close in the third quarter.
BlackRock Chief Executive Larry Fink told Wall Street analysts last week that he expects so-called illiquid alternative investments, which include private credit and typically come with higher fees than its other funds, to “be one of the more significant” drivers for BlackRock’s business over the next few years.
BlackRock reported $47.2 billion in illiquid alternative assets under management at the end of 2017. The company manages $6.3 trillion overall as of March 31.
Deep-pocketed institutional investors turn to the private debt market in hopes of getting richer returns than they can find in public markets, where central banks slashed interest rates in an effort to stabilize the global economy after the 2007-09 financial crisis.
TCP also manages TCP Capital Corp TCPC.O, a publicly traded business development corporation. Those specialized closed-end investment vehicles lend to small- and mid-sized private U.S. companies, and their leverage is capped by law.
Many invest in floating-rate debt that pays out more as rates rise, making it attractive to investors who expect the U.S. Federal Reserve to continue on its path of monetary policy tightening.
Reporting by Trevor Hunnicutt; additional reporting by Leela Parker Deo; editing by Jennifer Ablan and G Crosse
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