HSBC Holdings Plc (NYSE:HSBC) has not yet deployed its nearly $4 billion in dry powder from its asset managers’ private credit funds.
Last year, the bank announced that it would be looking to expand in the private credit space, with a goal of competing with major firms such as Blackstone and Apollo Global in the $1.8 trillion private credit market.
Despite the lag, a spokesperson for HSBC told Bloomberg that they are "committed to the asset managers offering in private credit funds."
HSBC recently recorded a $400 million loss linked to a loan extended to Apollo's Atlas SP Partners unit, which had financed U.K.-based mortgage lender Market Financial Solutions before its collapse into bankruptcy proceedings amid fraud allegations, Reuters reported earlier this month.
Following the announcement of HSBC's $400 million loss, shares of the bank's stock fell 6%.
This loss comes as the private credit space has experienced a downturn in the market.
While some feel the overall private credit sector is not facing systemic risk, others believe that pockets of the sector have been "obliterated."
Investors have voiced concerns regarding default risks, high interest rates, and the disruption AI may have on the software sector. Major banks have reported more than $108 billion in exposure. As a result, government agencies have been keeping an eye on the sector.
Earlier this month, U.S. Securities and Exchange Commission Chairman Paul Atkins said the SEC was investigating alleged fraud in the private credit sector.
Speaking at the Milken Institute Global Conference, Atkins did not identify which specific firms are under investigation. He noted that the SEC, U.S. Department of the Treasury and the Federal Reserve are all monitoring the private credit space.
Congress has also pressed several major private equity firms, including Apollo Global Management, KKR & Co., Carlyle Group, BlackRock and Blue Owl Capital, for detailed disclosures on their private credit operations.
The U.S. House Financial Services Committee requested information on sales practices, leverage, fees, incentives, audits, risk management and potential economic vulnerabilities.
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