Wells Fargo & Co. and Centerbridge Partners are launching a direct-lending fund, the latest in a flurry of bank efforts to gain share in the $1.5 trillion private-debt market.
The fund will target at least $5 billion, including $2.5 billion in equity commitments, and will primarily make senior secured loans to non-sponsor-backed middle-market firms in North America, according to a statement Tuesday. Centerbridge created a subsidiary called Overland Advisors to manage the business-development company, which is an investment vehicle popular in private credit. Wells Fargo, the fourth-largest US bank, will provide client sourcing and a minority investment.
Wells Fargo joins a growing list of banks muscling into the private-credit space in recent weeks. Earlier this month, Societe Generale SA announced a partnership with Brookfield Asset Management Ltd., and Deutsche Bank AG launched a dedicated private-debt fund. Meanwhile, JPMorgan Chase & Co. and Barclays Plc have both earmarked cash from their own balance sheets to compete on deals.
Private credit has erupted in popularity in recent years, first as investors sought higher-yielding assets in a low-rate environment and then amid rising interest rates globally, as many private loans are floating-rate. That’s threatening a key revenue source for traditional lenders, who have historically arranged and then sold the debt.
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