HPS Investment Partners, a $45bn credit firm that was formerly part of JPMorgan Asset Management, is selling a minority stake in its business to Dyal Capital Partners, a unit of Neuberger Berman, to free up cash to do more deals.
The stake was a passive, non-voting minority equity stake, so Dyal would not have any impact on HPS’s day-to-day operations, the firms said. Financial details of the deal were not disclosed
HPS’s assets are spread across public and private credit, including direct lending and leveraged loans. About $30bn was in private credit, said Scott Kapnick, the fund’s chief executive.
The firm’s clients, which include pension funds and sovereign wealth funds, are increasingly seeking to co-invest alongside HPS in debt financing opportunities, so the fund is looking to have more cash on hand for such situations.
“As the firm continues to grow and we get later in the credit cycle, we wanted to fortify our balance sheet in order to take advantage of long-term market opportunities as they arise,” Mr Kapnick told the Financial Times.
Dyal, which owns minority stakes in hedge funds and private equity, has been on a buying spree of late. The firm bought stakes in Clearlake Capital in May, Vector Capital in April, and Cerberus Business Finance, Atalaya Capital, TSSP and Sounds Point Capital last year. It also has minority investments in Jana Partners, Silver Lake, Starwood, Vista Equity and Graham Capital.
HPS “has distinguished itself through its exceptional management and investment team, and we believe they remain strategically positioned to further capitalise on a broad array of unique investment opportunities across the credit spectrum”, said Michael Rees, the head of Dyal Capital Partners.
HPS, formerly known as Highbridge Principle Strategies, was spun out of JPMorgan in early 2016 when the founders and management bought the business. Mr Kapnick had founded HPS in 2007 after leaving Goldman Sachs.
The firm raised one of the largest mezzanine debt funds in 2016, with $6.6bn, and another $4.5bn for a direct lending fund late last year. Credit funds such as HPS are lending to companies at a record rate as they dominate a business once run by big banks.
The New York-based fund is beefing up its operations in Europe, expanding its private credit business, including mezzanine debt, direct lending and leasing platforms, and in Asia credit. The firm’s direct lending business is one of the largest in the world, and has invested $21bn in 230 companies.
The firm hired Evercore earlier this year to run the stake sale process for them.