Blackstone draws €1bn into European private credit fund

Blackstone plans to double the size of its European private credit fund in the next year after raising €1bn from the region’s rich to invest in the booming $1.7tn market in private corporate loans.

The private equity giant has taken nearly two years to reach the milestone following the 2022 launch of its European Private Credit Fund, known as ECRED, which aims to replicate the success of its $54bn US flagship fund.

Goldman Sachs, CVC and Ares have also recently launched European funds designed to provide alternative financing for private equity buyouts as European investors slowly warm to the often illiquid asset class.

Wealthy US investors have long tapped the asset class but the $1.7tn market has exploded this year as insurers, sovereign wealth funds and pensions also step up their commitments.

“It took us 21 months to get to €1bn,” said Mike Carruthers, senior managing director and the European head of private credit at Blackstone. “I would like to challenge the team to get to €2bn in half that time, to double it in the next 10 to 11 months.”

ECRED has been launched in seven countries, including the UK, France and Italy, in partnerships with distributors such as BNP Paribas and Julius Baer. Blackstone plans to push into more markets and add distributors in the near future.

The US group runs its European fund in the same manner as its US counterpart, BCRED, targeting 80 per cent to 85 per cent private credit assets and 15 per cent to 20 per cent liquid assets.

Blackstone Credit has committed more than $3bn in Europe in the first half of this year, across transactions involving IRIS Software, Zellis, Focus Group, Rimes and PIB. It is also set to finance TPG’s acquisition of Aareon, announced on Monday.

“These are normal, creditworthy, big companies, not funky, not distressed, not complex, not lender of last resort. This is a lender of first choice,” Carruthers said, adding the companies that were sold in 2022 and 2023 were particularly high quality, “because private equity firms were only selling companies where there was going to be a competitive auction”.

The US group initially struggled to get ECRED off the ground due to complex, country-by-country regulation and a wary European investor base, which has traditionally favoured more conservative investments. After six months it had raised just €240mn, compared with $12bn raised by its US equivalent by the half-year mark.

Investors also had early worries about the fund’s liquidity and their ability to withdraw their assets. Blackstone has capped redemptions at 2 per cent of the fund’s size once a month, or 5 per cent every quarter.

In late 2022 Blackstone limited withdrawals from its $60bn Real Estate Income Trust, known as Breit, after fears about real estate valuations prompted a rush for redemptions.

“No one’s going to put €10mn into a €100mn fund, if they were 10 per cent of the fund they could never get their €10mn back without hitting the caps,” Carruthers admitted.

Despite the flurry of similar vehicles introduced by its competitors, Carruthers said he did not expect competition between firms seeking new investors: “I would think that the combined assets between everyone right now is sub-€3bn, so it’s a very small total of the overall market.”