(Bloomberg) — JPMorgan Chase & Co. is looking to buy a private credit firm to add to its $3.6 trillion asset management arm, as the biggest U.S. bank makes more inroads into the buzziest sector of Wall Street.
The JPMorgan unit is looking for a private credit shop that could bolster its private equity business, according to people familiar with the matter. As part of the effort, the company held talks to acquire Chicago-based Monroe Capital this year, but the two firms ultimately decided not to pursue a deal, the people said, asking not to be named to describe private discussions.
Spokesmen for JPMorgan and Monroe declined to comment.
Interest in the $1.7 trillion private loan industry has exploded in recent years. Alternative asset titans like Ares Management Corp. and Apollo Global Management Inc. have poured money into ever-larger deals for their portfolios. Other investors, as well as the banks themselves, are also inclined to make more bets.
JPMorgan's investment bank already has certain more than $10 billion of the firm's balance sheet for direct lending. The bank is also partnering with asset managers to join it in private credit deals, Bloomberg previously reported.
Read more: JPMorgan, Citi are copying from the private loan book
The asset management unit, which handles money for wealthy people and institutions, including hedge funds and pensions, is looking to boost its private loan offerings. It managed $17 billion in private credit assets at the end of last year — less than the nearly $19 billion in committed and managed capital Monroe had as of April 1.
For a direct lender, selling to a large bank can have implications for its franchise. The business would jump from a less regulated corner of the financial industry to one subject to strict rules and a set of supervisors. With this in mind, some private loan lenders have erred towards partnering with banks instead of merging with them.
While banks' push for private loans has the potential to let them compete with their traditional lending desks, it's also a way to raise asset management fees and offer borrowers a range of options as tighter rules capital restrictions limit their lending in other areas. Proponents of private lending say some borrowers prefer to deal with several direct lenders rather than take out a loan with one bank that can then be sold to dozens of other firms.
'Working on it'
A takeover would help JPMorgan's asset management arm grow quickly, but the company may eventually decide to grow its private loan offerings organically, one of the people said.
At an investor day on Monday, JPMorgan senior executives discussed Wall Street's focus on the sector and JPMorgan's efforts to create a franchise on multiple fronts. The firm must “find a way in the fiduciary space, as we are finding in the non-fiduciary space, to get private loans,” said President Daniel Pinto. He added that Mary Erdoes, longtime head of wealth and wealth management, and her team “are working on it.”
Chief Executive Jamie Dimon had a different take: “We're not going to buy a private equity company,” he said in response to a question on the subject — only to quickly take it down.
His top deputies “have to think all the time, regardless of what I say,” Dimon said. “I mean that. I have an opinion, but if they came in and said we have a good thing that makes sense for us, then yeah, well, we should do it.”