The turmoil facing U.S. regional banks has prompted some lenders to step back, leaving space for investors such as asset managers, private equity (PE) funds and insurers to lend more.
Non-bank lenders with deep pockets have invested in credit assets for years, but the regional banking crisis could supercharge their expansion into areas such as providing consumer car loans and mortgages, or financing the construction of buildings, according to industry executives.
A cooling U.S. economy has also prompted some large banks to rein in lending, leaving space for money managers to step in.
Direct lending by non-bank creditors contrasts with the more widespread practice of banks underwriting debt that they can sell in secondary markets.
"With loan terms tougher and tighter, the option for private credit providers is on steroids," said Drew Schardt, head of investment strategy at Hamilton Lane, one of the largest investment firms in private markets.
PE firms including Ares Management Corp, Brookfield Asset Management and KKR are lending in areas traditionally dominated by banks.
"We expect to grow further by filling the void that regional banks are leaving as they pull back from certain types of lending," said Dan Pietrzak, co-head of private credit at KKR, which manages $76 billion in credit funds. Pietrzak sees "attractive" assets in auto and consumer lending.
In the consumer business, $550 million of loans for homeowners buying solar panels from SunPower (SPWR.O) will be financed by KKR, under an agreement announced earlier this month.
Investors are looking for real estate opportunities as well. When American Lions sought financing to build a 363-unit residential building in Long Island City, it got a $250 million loan from Brookfield Asset Management.
"We see U.S. commercial banks retreating from real estate lending," in some cases because regulators have instructed banks to reduce their exposure, said Andrea Balkan, managing partner overseeing Brookfield Asset Management's real estate finance funds. "It's times like this when we have a unique ability to grow."
