(Bloomberg) — AllianceBernstein Holding LP’s head of options Matthew Bass is getting cozy with a few of the world’s greatest banks.

The US fund supervisor that oversees virtually $670 billion of property is providing funding to lenders — enabling the banks to maintain their most prestigious shoppers candy — in return for a minimize of the charges and entry to their shopper contact books. AllianceBernstein has been working with a variety of enormous world establishments and smaller regional banks in want of a capital accomplice to originate actual property and client finance loans.

“We’re in a position to leverage the banks’ relationship with debtors, which they’ve developed over a few years,” Bass stated in a phone interview. “On the identical time, banks are in a position to preserve these relationships in the event that they proceed lending, which offers a win/win for the financial institution and asset supervisor.”

The tie-ups mark an extra blurring of the road between the roles of asset managers and lenders. For different asset managers, the offers give them the prospect to deploy their dry powder and originate loans, whereas the banks get to keep up their shopper relationships whilst regulatory stress drives their withdrawal from lending. 

AllianceBernstein’s banking partnerships are being funded by shopper capital raised throughout its virtually $60 billion options enterprise, which homes personal credit score, industrial actual property and particular alternatives. The agency is scaling up and investing in distribution for its personal options enterprise, Bass stated.

“We’re not within the again seat – we’re driving shotgun with the banks,” Bass stated. “The banks must have significant pores and skin within the sport for it to work.”

Different managers and hedge funds have been embracing the rise of personal credit score – an trade that’s tripled in measurement since 2015 to $1.6 trillion immediately. It’s grown to embody conventional direct lending to smaller firms and buyout financing in addition to actual property and infrastructure debt.

Wall Avenue banks are attempting to determine one of the best ways to compete with personal credit score, which is consuming into the market share of the leveraged mortgage and high-yield bond markets, in addition to different lending arms — a key price generator.

In current months, Barclays Plc, Societe Generale SA, Deutsche Financial institution AG and Wells Fargo & Co. have all made concerted efforts to seize a slice of the personal credit score market, with various methods that usually contain some type of partnership with exterior capital.

JPMorgan Chase & Co. is looking for a possible accomplice to develop its personal credit score enterprise, Bloomberg reported earlier this month. The financial institution is in discussions with a number of asset managers together with sovereign wealth funds, pension funds, endowments and different asset managers, folks aware of the state of affairs stated on the time. 

For AllianceBernstein’s half, it’s rising its options enterprise primarily to capitalize on an anticipated wave of stress amid a funding crunch on the banks, in keeping with Bass. 

It’s at present elevating capital for a so-called NAV lending technique, he stated, a kind of financing that permits companies to borrow in opposition to a pool of their portfolio firms. The debt product has surged in recognition as rising borrowing prices and weak valuations throughout the personal fairness trade have made it more durable to promote property and fundraise. 

Bass stated the agency can also be focusing on the ultra-wealthy — dubbed the holy grail by buyers — because it permits them to increase their buyer base past conventional pension funds and endowments.

“Non-public wealth buyers are nonetheless underneath allotted to personal credit score and are searching for extra merchandise,” Bass stated. “There’s a whole lot of training that goes with that which we’re spending time on.”

“We’re seeing buyers usually need extra granular data in the case of personal credit score investments,” he added.