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Société Générale and Brookfield Asset Management are joining forces to create a €10bn fund in the thriving private credit market. This collaboration comes as Slawomir Krupa, the CEO of the French bank, aims to revitalize the institution.
The fund will launch with €2.5bn in capital and is projected to grow to €10bn within four years. It will primarily target renewable energy and transport companies, as well as the finance sector, according to SocGen and Brookfield.
The private credit market has experienced significant growth due to rising interest rates, which have driven up borrowing costs and made it more challenging for small and midsize companies to access bank loans. As a result, large hedge funds have increasingly ventured into this $1.5tn sector, which already emerged as an alternative to traditional bank loans, partly due to stricter financial regulations.
This partnership signifies a shift in SocGen’s strategy under Krupa’s leadership. In recent years, the French lender had gradually divested from its asset management operations, severing ties with Amundi and selling most of its Lyxor operations to Amundi in 2021.
Krupa, who assumed the CEO role after Frédéric Oudéa’s 15-year tenure, is under pressure to improve the bank’s performance and raise its shares, which have never fully recovered from the 2008 financial crisis and a rogue trading scandal that occurred in the same year. With his extensive experience as the former head of SocGen’s investment bank and his close relationships with several prominent New York-based fund managers, including Brookfield’s CEO Bruce Flatt, Krupa is expected to take a slightly different approach, forging strategic partnerships to propel SocGen forward.
In November of last year, when Krupa was CEO-elect, SocGen agreed to merge its equities research and cash equities business with US investment company AllianceBernstein—a deal he also played a key role in facilitating.
In this new private credit partnership, SocGen and Brookfield aim to provide “investment-grade financing options”. They will leverage SocGen’s loan assessment and approval capabilities, along with the asset manager’s expertise in marketing the products to end investors. The fund is specifically designed to meet the investment-grade product needs of insurance companies.
Blackstone and other investment managers have highlighted a “golden moment” for private credit, particularly in the US as regional banks scale back on lending. However, this growth has prompted calls for increased regulation in the industry. In the EU, member states are considering new legislation with potential restrictions on the amount of borrowed money that private debt funds can invest.
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