Hedge fund heavyweights like Point72, Millennium, and Jain Global are venturing into private credit and structured credit, challenging incumbents Blackstone, Ares, and Apollo. The shift comes as public markets shrink and demand for financing remains high. However, newcomers face execution risks such as leverage costs and operational complexity. The move offers institutional allocators new diversification opportunities, but success hinges on adapting to the patient, relationship-driven nature of private credit. Competing on financing terms and portfolio diversification may also present challenges for new entrants.

In response to hedge funds entering private markets, incumbents like Blackstone, Ares, and Apollo are expanding their distribution and scale, pushing newcomers into more complex niches. The shift blurs traditional investment categories, offering uncorrelated carry with bespoke structures but raising concerns about transparency and liquidity. Multistrats must balance underwriting discipline and workout intensity with origination to succeed in the evolving landscape. The potential for a durable third pillar beyond trading and public credit is there, but failure to adapt may result in a costly “tourist premium” for hedge funds in private markets.

Read more at Quiver Quantitative: Why Hedge Funds Are Pushing Into Private Markets (APO)