BlackRock’s Kapnick Says Big Firms to Gain From Credit Turmoil

BlackRock Inc.’s Scott Kapnick, who leads the firm’s private credit business, said the biggest players will capitalize on the current industry turmoil while some of its smaller lenders may get left behind.

“Most of the big managers are very good at managing risk, and the scaled players are going to continue to benefit from this period,” Kapnick, who is chief executive officer of HPS Investment Partners, said at the Bloomberg Invest event Wednesday. For smaller firms operating more niche strategies, “that’s a tougher spot to be,” he said.

Private credit executives have faced weeks of questions from investors over the resilience of the $1.8 trillion industry against writedowns, a rise in defaults and bets on the software sector that are now being upended by AI. From Blue Owl Capital Inc. to Blackstone Inc., private credit’s biggest firms are confronting a wave of withdrawals from retail investors turning skittish, and their shares are off to their worst start to a year in a decade.

Kapnick identified “pockets” of difficulty facing some credit firms, especially among smaller borrowers vulnerable to the triple threat of tariffs, labor costs and higher interest rates. Software businesses that are easier for AI to disrupt will also struggle, he said.

“There was a lot of capital that was put in from very smart private equity and very smart institutional investors into software, really in the ‘21, ‘22 vintage, that was pretty highly priced,” said Kapnick, who co-founded HPS and then last year sold the business to BlackRock for $12 billion. “And as that works its way through the system now four or five years in, you may see pockets there.”

BlackRock, a giant of stock and bond investing, is in the middle of a major transformation to catch up with leading private firms. Chief Executive Officer Larry Fink plunked down more than $25 billion, betting that private credit and infrastructure would become much greater holdings for big institutional as well as everyday retail investors. BlackRock’s acquisition of HPS is central to the firm’s push. 

“There’s been very little overlap,” Kapnick said of the firm’s integration.

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