BlackRock’s loss will fuel wider concerns about shadow banking industry - Getty The world’s biggest investment group is facing a $500m (£380m) hit after its shadow banking business fell victim to an alleged fraud. BlackRock’s private credit investment arm, HPS Investment Partners, has started legal action to recover loans it made to a US telecom firm, which has been accused of faking payments from customers. The loss will fuel concerns about the opaque shadow banking industry, which has drawn billions of ...

Core Viewpoint - The $3 trillion shadow banking industry is exhibiting "bubble-like characteristics" that could potentially lead to a global financial shock, according to Fitch Ratings [1]. Group 1: Market Concerns - The recent $12 billion collapse of First Brands and warnings from two regional US banks about bad loans have raised concerns about underlying issues in the private credit market [2]. - The private credit market has grown by 50% in recent years, with the IMF estimating that banks globally have approximately $4.5 trillion in exposure to private credit players [3]. Group 2: Risk Factors - Fitch notes that private credit is transitioning from a niche product to a significant asset class, increasing in both scale and complexity, which could expose the financial system to unexpected risks [4][5]. - The involvement of individual investors alongside major banks and fund managers, along with increased leverage among borrowers, are contributing to the bubble-like trends [5]. - "Spread compression," where investors accept lower yields on risky investments, may indicate weaker lending standards [6]. Group 3: Current Market Dynamics - Despite the emerging risks, Fitch has not observed "classic bubble signs," as investors are still cautious in pricing high-risk credit [7]. - Banks' exposure to risky borrowers is primarily indirect, and they possess limited liquidity risk, allowing them to withdraw funds from private credit vehicles if necessary [7]. Group 4: Economic Outlook - Signs of an economic slowdown in the US could lead to increased defaults among heavily indebted borrowers, particularly in sectors like auto parts and used cars [8].

The index of Britain’s top 100 stocks was up 0.25pc as markets closed after Trump said he expects to strike a “fantastic” trade deal with China at talks in South Korea next week.The FTSE -100 index held its gains on Tuesday as stocks were lifted on hopes that Donald Trump’s talks with Xi Jinping next week could lead to improved relations between the US and China.That’s all for today but you can read all the latest business and economics stories here.Thanks for joining us on this live blog.His comments will ...

Core Insights - Wall Street investors are selling shares in major money managers due to concerns over their $3 trillion push into lending, with shares in Apollo, Blackstone, KKR, and Ares dropping over 10% in the last month despite a rising US stock market [1][2] Group 1: Market Performance - The S&P 500 has increased by 3.4% during the same period, with a year-to-date gain of over 15% driven by excitement around artificial intelligence [2] - The money managers affected were initially private equity investors but have expanded into private credit, contributing to a $3 trillion private credit market that has grown by $1 trillion in the past five years [3] Group 2: Risks in Lending - Concerns are rising about borrowers' ability to repay private loans, especially in light of potential stock market crashes linked to over-inflated tech stocks [4] - The collapse of First Brands, a US car parts supplier, has intensified fears, with reports of $2.3 billion "vanishing" from a private lender [5] - JP Morgan has indicated that despite low default rates, there are signs of stress among borrowers, suggesting potential widespread issues if economic conditions worsen [5][6] Group 3: Industry Dynamics - The private credit sector has seen significant involvement from pension and insurance funds, as well as banks, indicating its extensive reach [6][7] - Apollo has announced plans to invest up to $4.5 billion in projects with EDF, including the Hinkley Point C nuclear power station, and aims to lend $275 billion annually over the next five years [7]