BMO Expands Private Credit Reach Via Deal With Alternative Asset Manager

Toronto: So, BMO Financial Group just made a big move by teaming up with Canal Road Group. They’re looking to dive into the private credit scene, planning to invest up to a whopping $1 billion in direct lending.

This partnership is part of a growing trend where banks are joining forces with private credit managers. With all the new regulations and limited capital, it makes sense for them to collaborate. Just last year, Citigroup and Apollo Global Management struck a $25 billion deal, and Goldman Sachs did something similar with Mubadala Investment.

A BMO spokesperson mentioned they’re keeping some details under wraps, like how much they’re investing or their ownership stake. But they’re all in on supporting Canal Road’s lending activities.

Banks are seeing private markets as a way to boost their fee income without tying up too much of their own cash. Meanwhile, private credit funds are leaning on banks for their lending expertise and connections with investors and companies.

BMO isn’t new to this game. They’ve been active in forming partnerships, like the one with Oak Hill Advisors back in 2021, which has already deployed over $12 billion.

According to Arif Bhalwani, CEO of Third Eye Capital, this shift means banks are moving from just holding assets to actually originating loans. He pointed out that regulatory pressures and the need for better capital efficiency are pushing banks to focus on what they do best—building relationships and originating loans.

Canal Road Group, based in Miami, is all about managing portfolios of senior secured corporate debt investments in North America. BMO will have a non-voting minority stake in Canal Road’s management company, which is a smart move for both sides.