BlackRock, the world's largest asset management company, experiences a significant setback in its private equity business. A $600 million stake in the insurance outsourcing firm Alacrity has become completely devalued after the company was taken over by its creditors due to financial difficulties.

The acquisition was made by a group of private credit funds, led by Antares Capital, Blue Owl Capital, KKR, and Goldman Sachs Asset Management. In February 2023, BlackRock had acquired a majority stake in Alacrity from Kohlberg & Co. before the company faltered under the burden of high debt and rising interest rates. Alacrity is part of a series of restructurings in the booming private credit sector, which is increasingly under pressure. Companies owned by private equity firms, large borrowers in this segment, are struggling with increased interest rates and high debt. Already in the previous year, lenders like Blue Owl and Ares Management had to incur losses on Pluralsight, which also burdened Vista Equity Partners with $4 billion. In recent years, BlackRock has massively invested in alternative assets to keep up with competitors like Blackstone, KKR, and Apollo. In 2023, the company spent almost $30 billion to strengthen its position in this market, including the acquisition of two leading investment firms.

The loss at Alacrity, however, leaves a blemish on the record of the Long Term Private Capital fund, which until early 2024 had shown an impressive internal rate of return (IRR) of 33 percent. Nevertheless, the Distributed-to-Paid-In-Capital value (DPI) remained at 0.6, meaning less capital has flowed back to investors than was originally contributed. Although the fund was successful, BlackRock shelved its plans to launch a new $5 billion fund last year. Alacrity is one of seven publicly known investments of this long-term strategy, whose future orientation is now under scrutiny.