SocGen teams up with Brookfield in private credit push

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Société Générale and Brookfield Asset Management are to team up for a €10bn fund in the fast-growing, private credit market as the French bank’s chief executive Slawomir Krupa looks to shake up the lender.

The groups said the fund, to launch with €2.5bn in capital, would grow to €10bn over the next four years. It would target renewable energy and transport companies as well as the finance sector, SocGen and Brookfield said. 

The move follows a big expansion of private credit markets as rising interest rates push up borrowing costs and hamper access to bank loans for some small and midsized companies.

Large hedge funds have been increasing their presence in the $1.5tn sector, which had already developed strongly as an alternative to bank loans, partly as a result of tightening financial regulation.

For SocGen, the tie-up marks a shift under Krupa after the French lender gradually exited its asset management operations in recent years. It ended its involvement with the asset manager Amundi when it was listed in 2015, leaving rival bank Crédit Agricole as the controlling shareholder. It sold most of its Lyxor operations to Amundi in 2021.

Krupa, who is set to unveil the pillars of his new strategy next week, took the reins at SocGen after 15 years of Frédéric Oudéa’s tenure, with pressure to try to lift the bank’s shares after years of relative underperformance compared with peers. The company’s shares have never recovered to the levels reached before the 2008 financial crisis and a rogue trading scandal the same year.

The former head of SocGen’s investment bank and a veteran of the lender, Krupa is expected to take a slightly different tack, including with some of the partnerships he is forging.

He has close relationships with a number of large New York-based fund managers after a period working in the city, according to people close to him. Brookfield’s chief executive Bruce Flatt is among them.

In November last year, when Krupa was already chief-executive-in-waiting, SocGen agreed to merge its equities research and cash equities business with US investment company AllianceBernstein, in a deal he also shepherded.

In the new private credit partnership, SocGen and Brookfield said they would provide “investment-grade financing options”. They said they would combine their expertise, including the French bank’s capabilities in assessing and approving loans and the asset manager’s capabilities marketing the products to end investors.

SocGen and Brookfield said the fund was expected to meet the needs of insurance companies for investment-grade products.

Investment managers such as Blackstone have flagged a “golden moment” for private credit in recent months, including in the US as regional banks pull back on some of their lending.

However, that has prompted calls for more oversight of the industry. In the EU, member states are looking at new legislation with some restrictions on the amount of borrowed money that private debt funds can invest.