Stock Markets
Exclusive-Morgan Stanley plans to double private credit portfolio to $50 billion
© Reuters. FILE PHOTO: The logo for Morgan Stanley is seen on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 3, 2021. REUTERS/Andrew Kelly/File Photo
By Tatiana Bautzer and Saeed Azhar
NEW YORK (Reuters) – Morgan Stanley’s asset management division aims to double its private credit portfolio to $50 billion in the medium term as it gathers funds from large investors to loan out to companies.
The bank has invested more than $300 million into the business, which has already gathered about $25 billion in total assets from mainly institutional investors, David Miller, Morgan Stanley’s global head of private credit and equity told Reuters in an interview.
“The vast majority of new capital will continue to come over the next decade from our institutional clients,” Miller said. Institutional investors such as sovereign wealth funds and insurance companies hold two thirds of the current portfolio and wealthy individuals account for the rest, he said.
Miller estimates the broader private credit market has grown as large as $2 trillion.
The extension of private credit, of which direct lending is a key part, has increased since the financial crisis as stricter regulations made it more expensive for banks to finance risky loans for debt-ridden companies.
Activity has surged in the last two years. As banks’ capital got tied up in risky loans and interest rates rose, groups of banks were able to provide less financing via traditional syndicated loans. Private lenders such as Ares Management (NYSE:), KKR and Blackstone (NYSE:) swept in.
Still, Wall Street banks have found ways to participate in the new market by gathering money for loans from investors instead of using their own balance sheets.
Goldman Sachs CEO David Solomon told analysts this month that the bank seeks to raise $40 billion to $50 billion in alternative funds this year. A large chunk of that will be dedicated to private credit, according to a source familiar with the matter.
JPMorgan has set aside $10 billion of its own capital for private credit, sources familiar with the matter said. It is also seeking capital from outside investors, keen to partner the bank for the segment, one of the sources said.
JPMorgan declined to comment on its plans.
Wells Fargo teamed up with private equity firm Centerbridge Partners to build a business focused on direct lending to midsize, family-owned and private companies in North America.
With market participants increasingly expecting the Federal Reserve to cut interest rates, traditional banks are starting to become more competitive in loan markets versus to direct lenders, said Jeff Levin, Morgan Stanley’s co-head of North America private credit and head of direct lending.
Lower rates will enable banks to charge companies less in interest for risky loans than private credit participants, who typically charge more. And cheaper borrowing costs are likely to spur more economic activity and dealmaking in general, another factor that could spur activity for banks.
“As the syndicated markets activity picks up and the banks become more aggressive, the share of private credit may decline among the large deals, but we will continue to see growth,” Levin said.
Morgan Stanley’s private credit group, housed in its asset management arm, has around 60 bankers that collaborate with investment bankers to originate loans.
Levin, who oversees a $16 billion private lending portfolio, said the loans are granted to companies ranging from mid-size to large corporations.
On Friday, Argus increased its stock price target on Rithm Capital Corp. (NYSE: RITM) to $13.00, up from the previous $12.00, while reaffirming its Buy rating on the stock. The firm highlighted the company’s ongoing transformation and expansion efforts as the rationale behind the revised target price.
Rithm Capital, which rebranded from New Residential Investment Corp. in August 2022, has since transitioned to internal management after previously being managed by Fortress Investment Group. This change is part of a broader transformation of the company’s business model initiated following the financial crisis in late March 2020.
The company has been actively growing its mortgage servicing operations and seizing new debt-related investment opportunities. In its expansion efforts, Rithm Capital has acquired a 50% interest in GreenBarn Investment Group, a commercial real estate equity and debt investment management firm.
Further bolstering its portfolio, Rithm Capital has also made significant acquisitions, including purchasing $1.4 billion worth of Marcus consumer loans from Goldman Sachs for $145 million. Moreover, the company has completed the acquisition of Computershare Mortgage Services Inc. and its affiliates, including Specialized Loan Servicing LLC (SLS), for an approximate total of $720 million.
Completing its notable transactions, Rithm Capital finalized the acquisition of the $33 billion alternative asset manager Sculptor Capital Management (NYSE:) in the fourth quarter of 2023. These strategic moves have contributed to the firm’s positive outlook on Rithm Capital’s stock and its increased price target.
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In light of Argus’s stock recent price target increase for Rithm Capital Corp. (NYSE: RITM), InvestingPro data further supports the optimistic outlook. Rithm Capital’s market capitalization stands at a robust $5.55 billion, while maintaining an attractive P/E ratio of 7.41, indicating that the stock may be undervalued relative to its earnings.
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This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
On Friday, JPMorgan upheld its Overweight rating on CK Infrastructure Holdings (1038:HK) (OTC: CKISY) with a consistent price target of HK$50.00. The firm’s analysis was based on a review of the company’s financial year 2023 results and current operating trends. Adjustments were made to the earnings forecasts for the years 2024 and 2025, with a slight reduction for 2024 by 2% and an increase for 2025 by 2%. These revisions take into account the influence of regulatory changes, inflation, and fluctuating exchange rates on the company’s regulated assets, particularly in the United Kingdom, Australia, and other regions.
The updated model reflects the latest developments and anticipates the potential financial impact on CK Infrastructure. The firm has decided to roll forward its price target to June 2025, while maintaining the previous target of HK$50. The Overweight rating suggests that JPMorgan continues to view the stock favorably in comparison to the sector average.
CK Infrastructure Holdings, which operates a diversified portfolio of infrastructure businesses, has been assessed for its performance and outlook in light of various external factors. The company’s exposure to regulatory resets and economic conditions in different geographies necessitates a nuanced understanding of its earnings potential.
The revised earnings estimates are a direct result of the firm’s comprehensive evaluation of the company’s regulated assets. These assets, which are subject to oversight by regulatory bodies, can be affected by policy changes and economic shifts, such as inflation and currency exchange rates.
JPMorgan’s reaffirmation of the Overweight rating indicates confidence in CK Infrastructure’s ability to navigate the complexities of its operating environment. The price target of HK$50 remains unchanged, signaling the firm’s belief in the company’s value proposition and its prospects for the future.
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This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
On Friday, Argus maintained a Buy rating on Ashland Inc . (NYSE: NYSE:) and increased the stock’s price target to $118 from $109. This adjustment suggests a potential total return of approximately 21%, including dividends, based on the current share prices.
The specialty chemicals and additives provider has experienced underwhelming operational and financial performance over recent quarters, including the second quarter of 2024. This was attributed to slower economic growth in key regions such as China, Europe, and parts of Asia. These areas faced challenges due to soft customer demand and ongoing inventory destocking by suppliers, which adversely affected Ashland’s revenue and profit margins.
Despite these challenges, there have been positive signs in the last quarter indicating a shift in market conditions. Ashland’s management has reported a gradual increase in demand across most of the company’s end markets.
According to Argus, this improvement is a result of the destocking cycle nearing its end and customer demand beginning to rise, which are seen as favorable trends for Ashland’s future growth.
The revised stock price target reflects the analyst’s confidence in Ashland’s recovery trajectory as the market dynamics that previously hindered the company’s performance are starting to reverse. The upward revision in the price target is based on the expectation of a continued recovery in customer demand patterns and the conclusion of inventory destocking.
Investors and market watchers will be monitoring Ashland’s progress closely, as the company aims to capitalize on the improving demand in its various markets and work towards delivering value to its shareholders.
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InvestingPro Insights
As Argus maintains a positive outlook on Ashland Inc. (NYSE: ASH), highlighting the potential for a 21% total return, InvestingPro data provides additional insights into the company’s financial health and market performance.
Ashland’s management’s aggressive share buyback strategy and a high shareholder yield are noteworthy, as noted by InvestingPro Tips. Furthermore, the company’s consistent dividend growth, with dividends raised for five consecutive years and maintained for 54 years, underscores its commitment to shareholder returns.
From a market perspective, Ashland’s stock is trading near its 52-week high, with analysts predicting profitability for the year. The company’s strong liquidity position, with liquid assets surpassing short-term obligations, is reassuring for investors.
Key financial metrics include a market capitalization of $4.98 billion, a P/E ratio of 26.25, and a dividend yield of 1.64%. Despite a decline in revenue growth over the last twelve months, the stock has experienced a significant price uptick, with a 29.41% total return over the last six months.
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This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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