(Bloomberg) -- PGIM is looking to boost its private-market assets by more than 50% to $500 billion in the next five years, with a major push into private credit through acquisitions.
The New Jersey-based money manager is assessing options to buy asset-backed finance firms with a strong origination capability in particular, Eric Adler, chief executive of PGIM Private Alternatives, said in an interview. The firm is also seeking businesses with similar underlying capability that allows them to structure products based on loans that are originated, he said.
“Private credit is the biggest area for everyone,” Adler said. “Its definition is getting wider and it’s opened up the door for all sorts of different solutions to come in, such as asset-backed finance.”
Demand for private credit has boomed in the past few years, making it a $1.7 trillion market, as rising borrowing costs and risk of defaults prompted traditional banks to cut back on loans, allowing other class of lenders to step in.
PGIM has been present in private credit for decades, but its plan for a major push is coming at a time when some of the industry titans are starting to worry if the boom is coming to an end. After having expanded their offerings, some alternative asset managers are now facing challenges as they struggle to return cash to investors and banks make a comeback, undercutting direct lenders.
Read More: Private Credit and Its Investors Fret the Golden Age Has Gone
PGIM consolidated its private-market capabilities last year with the new division, and appointed Adler to lead and grow the unit, which now manages $320 billion, of which about $102 billion is in private credit and $210 billion is in real estate. Overall, the company has about $1.3 trillion in assets under management.
Adler said he is looking to benefit from an increase in reinsurance mandates, a recovery in markets such as real estate where the firm already has a presence as well as from expanding in new markets, including the Middle East. The firm is also looking to make an acquisition in infrastructure equity.
Clients are looking to invest with fund managers who can offer a wide variety of strategies because they’re consolidating their relationships, and this is why PGIM created its private alternatives unit last year, Adler said.
“We’re going to see more differentiation within private credit,” he said. “Those players who can source deals directly and through sponsored and intermediary channels have an advantage” from the diversification, he added.
