In a move to gain an advantage in the competitive market, Deutsche Bank announced that its asset management arm, DWS, will have priority access to private credit deals generated by the bank. DWS will have the first opportunity to explore asset-based finance, direct lending, and other private credit opportunities identified by Deutsche Bank, allowing DWS to offer these investments to its clients.

According to Stefan Hoops, DWS's CEO, private credit is a crucial offering for clients seeking exposure to real-economy investments. He emphasized that origination is key for alternative asset managers, particularly in asset-based finance, which necessitates unique origination channels different from direct lending.

Private credit funds operate as non-bank lenders, providing loans to companies with fewer regulatory constraints compared to traditional lenders. The private credit industry has witnessed significant growth, with firms like Apollo, KKR, and Blackstone encroaching on banks' market share. To capitalize on the trend and cater to rising investor demand for alternative assets, banks are entering into partnerships with private credit managers, mitigating capital risks while leveraging customer relationships.

In a strategic move, Patrick Connors, Deutsche Bank's European head of global credit financing and solutions, will join DWS as the global head of private credit as part of the agreement. DWS, managing 1 trillion euros in assets, allocates 110 billion euros to alternative investments, underscoring the growing interest in this sector.

Regulators have raised concerns about the expanding 'shadow banking' sector, where private credit lenders operate with limited oversight. Moody's highlighted the risks associated with private credit lenders extending beyond traditional lending into areas like asset-based financing.