LONDON (Reuters) – Deutsche Bank will give its asset management arm preferred access to private credit deals it originates, the companies said on Tuesday, as the German institutions look for an edge in the booming but increasingly competitive market.
Under the arrangement, DWS will be given the first look at “certain asset-based finance, direct lending and other private credit asset opportunities” Deutsche Bank finds, which DWS can then sell to its clients.
“Private Credit is a key offering for our clients who are looking for exposure to real-economy investments,” said Stefan Hoops, CEO at DWS. “Origination is the main differentiator for Alternative Asset Managers, especially for asset-based finance which requires very different origination channels than direct lending.”
Private credit funds are non-bank lenders which lend money to companies and typically face less regulation than traditional lenders. They have boomed in recent years, with the likes of Apollo, KKR and Blackstone eating into banks’ market share.
Several banks have responded by striking deals with private credit managers, such as an agreement Citi announced with Apollo last year, so they can leverage their relationships with customers but risk little or none of their own capital.
At the same time investor demand for alternative assets including private credit is soaring, offering new fee pools for fund managers like DWS.
As part of the agreement, DWS said Patrick Connors, Deutsche Bank’s European head of global credit financing and solutions, will join DWS as global head of private credit. DWS has 110 billion euros of its 1 trillion euros in assets under management in alternatives.
Regulators have expressed concern about increased lending in the ‘shadow banking’ sector, where they have less visibility. A push by private credit lenders beyond traditional middle-market lending into areas such as asset-based financing also creates new risks, Moody’s said in a report last year.
(Reporting by Tommy Reggiori Wilkes, editing by Deepa Babington)
