Guardian Life nabs minority stake in HPS as lending booms

The Guardian Life Insurance Co. of America has acquired a minority stake in private credit firm HPS Investment Partners in the latest move by insurers to increase their footprint in the direct lending market.

Guardian will provide capital for HPS, which oversaw $80 billion in assets at year-end, to invest across all its private-credit strategies, from senior and junior debt to real estate and energy, according to a statement seen by Bloomberg that didn’t disclose the terms. The New York-based firms will also work together in developing new fixed-income trades.

It’s the latest push from insurers into the booming world of private credit, where loans can come with a elevated interest rate and typically offer an illiquidity premium to investors willing to lock up capital.

HPS was founded in 2007 by Scott Kapnick to focus on credit and longer-dated less liquid investment opportunities. It was originally a division of Highbridge Capital Management within J.P. Morgan Asset Management and known as Highbridge Principal Strategies.

Earlier this month, HPS launched a private business development company with $1.2 billion ready to invest in middle-market companies. In September, the firm closed its largest-ever fund at $15.4 billion.

The list of insurers acquiring stakes in lenders is growing. Last year, Aflac Inc.’s investment arm committed $3 billion to Varagon Capital Partners, which is backed by American International Group Inc. Barings is owned by MassMutual and AllianceBernstein manages the AB Private Credit platform.

“We are confident that many opportunities for collaboration exist between our companies,” said Andrew McMahon, chief executive officer of Guardian.

Lazard and Berkshire Partners advised Guardian on the transaction. JPMorgan Chase & Co. and Goldman Sachs Group Inc. were financial advisors to HPS.

Insurance companies were among the largest investors in private credit in 2021, according to financial research firm Preqin.