JPMorgan Chase & Co. is raising money for a mezzanine fund through its asset- and wealth-management arm, reported Bloomberg.
The firm is looking to raise as much as $1 billion from investors for a fund that would focus on providing financing to companies using a hybrid of equity and debt and the bank has already raised a significant portion of its target.
The decision caps years of discussion about how to bridge a gap in the asset manager’s alternatives offerings after JPMorgan spun out the credit manager formerly known as Highbridge Principal Strategies in early 2016, leaving it without a mezzanine fund. At the time, JPMorgan considered raising its own fund but shelved the plans because it did not want to compete with HPS while it maintained a minority stake in Highbridge’s private-equity business.
Mezzanine funds invest in the riskier portion of the capital structure in exchange for higher returns.In a report, Ernst & Young said that fundraising for mezzanine strategies has taken a hit as managers have struggled to put cash to work amid competition from other products like unitranche financing,
Earlier this year, JPMorgan changed the focus for its $2 billion multistrategy Highbridge fund—converting it into a credit-only vehicle.
Mezzanine financings are typically used in private debt deals to midsize companies that are too small to tap capital markets.