• Firms want more private market products to offer clients and are willing to buy instead of build.
• Private credit firms with $30 billion to $70 billion in assets will be the firms to watch.
• While deals make sense on paper, firms might have to deal with potential culture clashes.

The trend in asset management is pretty clear — private markets are the new black.

"If you're not in private markets or private credit, you'll need to move in that direction, or you'll get left behind," PwC financial services deal leader Greg McGahan told Business Insider.

Asset managers who have traditionally relied on ETFs and mutual funds to make money are itching to expand into alternative assets to diversify their offerings and boost fee revenue, a new PwC report said. That demand and expectations that interest rates will continue to drop and incoming light-touch regulators mean asset managers are ready to dust off their dealmaking playbooks.

Private credit firms specifically are in demand, as shown by the blockbuster BlackRock deal announced last week. The asset management giant agreed to buy the private credit firm HPS Investment Partners for $12 billion.

And it's not just the traditional money managers. Private equity firms are also using acquisitions to strengthen their private credit capabilities and market presence. PwC sees increasing competition in private credit contributing to the consolidation of alternative asset managers.

McGahan said private credit firms with between $30 billion and $70 billion in assets under management will be the ones to watch. They will either need to make a deal to grow bigger or be snapped up themselves.

"Those types of shops potentially could be absorbed into other shops that are looking to grow their portfolios," he said. "It's either acquire or be acquired."

Deals in alternatives will also be driven by aging founders in the private markets space who are trying to figure out succession planning and capitalizing on the ability to monetize their investments.

For his part, McGahan is seeing his deals practice's work ticking up and "getting up to full capacity. We'll be at supersaturation levels pretty shortly. So, I think you're seeing that pent-up demand now manifest itself."

Questions of culture

While the marriage of firms operating in one investing discipline with another makes sense for diversification reasons, the actual integration of the two could be trickier.

Culture and compensation are very different between traditional firms and alternatives. A portfolio manager at a publicly traded mutual fund might receive cash compensation and equity stakes. If you're a private equity manager, you're paid with carried interest, or a percentage of profits generated from the firm's investments.

"Could you have within a large traditional manager basically an alternative platform where the PMs are earning multiples of the existing PMs on the traditional side? That's going to be a cultural challenge,' McGahan said. He added there are also operational differences and gave the example of a private credit firm using treasury functions daily versus a private equity firm that uses a couple times a month.

The question of cultural fit is top of mind at BlackRock when the asset manager makes acquisitions, according to the firm's CFO Martin Small. BlackRock has made several high-profile acquisitions this year, snapping up Global Infrastructure Partners in January in addition to HPS.

Small, who was part of many meetings with HPS's executive team to test the waters, said the cofounders shared important values with BlackRock CEO Larry Fink and firm president Rob Kapito.

"We all speak the same language," Small said at the Goldman Sachs Financial Conference in New York. "They're founders. Larry Fink and Rob Kapito are founders. We're client-centered firms. We believe in scale, we believe in global."

Integrating two firms successfully requires lots of important — if technical— work behind the scenes, Small added.

"People, platform, process — think about all the pedestrian things of the employee experience. You've got to be on the same email system, you've got to make sure people's laptops work, you've got to make their key cards work at the door, " he said. "All of that's done so we can just get to business on realizing the synergies and delivering for clients.

• BlackRock is on a string of multibillion-dollar acquisitions to bolster its private-markets prowess.
• In late November, the asset management titan bought private-credit firm HPS for $12 billion.
• CFO Martin Small explained how the acquisition fits the firm's three requirements.

BlackRock is spending top dollar in its quest to dominate private-markets investing, recently agreeing to buy private-credit firm HPS Investment Partners for $12 billion. It's been a busy year with the asset management giant also buying data powerhouse Preqin and private-equity firm Global Infrastructure Partners (GIP) for $3.2 billion and $12.5 billion, respectively, earlier this year.

"Inorganic has always been a fundamental part of the BlackRock strategy," said Martin Small, the firm's chief financial officer, in an interview at the Goldman Sachs Financial Services Conference on Tuesday.

BlackRock isn't afraid to take big swings.

"We've never shied away from taking big bets," CEO Larry Fink said in an analyst call about the GIP acquisition last week.

BlackRock, which oversees $11.5 trillion, is not new to transforming itself through deals. In 2009, it pushed into passive investing when it bought Barclays' asset-management business. The acquistion gave it iShares and helped it become the public markets juggernaut it is today.

The firm has important criteria for its major acquisitions. At the New York City event, Small laid out the top three factors and how HPS met them.

Cultural fit

Small, an 18-year BlackRock veteran who is also the global head of corporate strategy, named cultural fit as his top priority.

"We have to acquire the kind of people that are aligned to a 'One BlackRock' culture and mission," he said, referring to the firm's ethos of working collaboratively.

Small was part of many meetings with HPS's executive team to test the waters. He said the cofounders shared important values with Fink and BlackRock President Rob Kapito.

"We all speak the same language," he said. "They're founders. Larry Fink and Rob Kapito are founders. We're client-centered firms. We believe in scale, we believe in global."

The three cofounders of HPS — Scott Kanick, Mike Patterson, and Scot French — will lead a new private financing solutions unit at BlackRock and join the firm's global executive committee.

Enrich and extend BlackRock's platform

BlackRock only makes acquisitions that are additive in more ways than one.

"We've been in all the businesses that we've acquired, whether it's private credit or infrastructure or SMA or options or whatever. We've done technology and data in the last year," Small said. "It's not just about new capabilities. It's about new capabilities that make the ones you have better."

Combining BlackRock's existing private credit business with that of HPS will produce a diversified business with a broader reach.

"HPS has been very active in kind of the upper-middle market in terms of direct lending, but also the junior capital solutions," Small said. "Our team has historically been active more in the middle market, kind of $75 million EBITDA borrower base. So there's an enrichment."

"I also think that'll strengthen origination, our ability to do more transactions, meet borrowers where they are," he added.

Topline results

"You've got to be a credible operator on a consolidated basis of these businesses," Small said of acquisition targets.

Given BlackRock's prowess, it takes a sizable acquisition to move the needle. HPS's $148 billion in client assets fits the bill.

"We'll now have a $220 billion preform a private credit business at BlackRock so we'll be very scaled in that regard," he said.

• The biggest hedge funds are battling it out to attract and retain top talent and outperform peers.
• Business Insider has talked to elite hedge funds to get a peek into their recruiting processes.
• From internships to how they hire for tech, here's what we know about getting a job at a hedge fund.

The war for the best hedge fund talent cuts across all levels and positions. Firms like Citadel, Point72, D.E. Shaw, and Bridgewater are in constant competition for the best and brightest to help them gain an edge in the cutthroat industry. 

These behemoth funds are now putting serious time and resources into recruiting for internship and training programs to create a steady employee pipeline.

Eye-popping pay, prestige, challenging work environments, and the promise of working with some of the best investors in the industry means there's a lot of competition for a spot at one of these firms. 

The money is top-shelf, even for financial services jobs.

These funds, which have grown into behemoths, are now contributing serious time and resources to recruit for internship and training programs that could better guarantee them a steady employee pipeline.

Eye-popping pay, prestige, challenging work environments, and the promise of working with some of the best investors in the industry means they have a pretty attractive proposition to offer.

Internships at quant fund D.E. Shaw can pay up to $22,000. Entry-level analysts and software engineers get paid above 6 figures a year. Portfolio managers with winning strategies can take home millions. 

Business Insider has talked to some of the biggest hedge fund managers about how they attract talent, as well as ways to join their ranks and be successful at their firms. Here's everything we know. 

Internships and fellowships

The opaque and secretive world of hedge funds might not necessarily be an obvious choice for many college graduates. Massive money managers are launching new programs to change that and attract young, diverse wunderkinder at earlier stages than before. 

• Inside Balyasny's ATLAS Program for High School Students
• Why Balyasny, Bridgewater, and Point72 are engaging students from underrepresented backgrounds about hedge funds
• Bridgewater's chief diversity officer explains how the hedge fund is using its new fellowship program to create a pipeline of diverse talent in finance 

• Here's how to land a spot at Citadel's elite summer internship 
• A D.E. Shaw internship could land a dream gig at the secretive hedge fund. Here's what it takes. 
• What it takes to stand out as an intern at Steve Cohen's Point72 and land a job offer, according to 2 portfolio managers and its program director 
• Citadel's Ken Griffin's advice to interns: Hustle during your 20s and be aggressive when asking for a promotion

Analyst and investment training programs

Typically, hedge funds acquire their investment talent after a few years of working at an investment bank. Increasingly though, the industry's top players are paying graduates to train through intensive programs that can lead to joining investment teams straight after college. 

• How to get accepted into Point72's ultra-elite analyst training program, whose acceptance rate is less than 1%  
• This Citadel training program is harder to get into than Harvard and can lead to a six-figure salary with the elite hedge fund after graduation 

Even the way up-and-coming portfolio managers cut their teeth has evolved.

• How Dmitry Balyasny's $21 billion hedge fund is looking to get ahead in the war for investment talent
• Inside Point72's boot camp for developing all-star portfolio managers, where Steve Cohen is known to grill up-and-comers who think they're ready for the big time

Tech jobs and training programs

Hedge funds have long been competing with the finance industry and top tech companies for top technologists. Engineers and algorithm developers are key to helping researchers, data scientists, and traders develop cutting-edge investment strategies and platforms. Quant shop D.E. Shaw also has a unique approach to finding talent.

• Why quant giant D.E. Shaw seeks out academics, doctors, and veterans to work at the $60 billion hedge fund
• Inside Citadel's exclusive engineering program that's helped the $47 billion hedge fund snap up talent from Google and Goldman Sachs
•  Here's how to get a job at Billionaire Izzy Englander's Millennium, from the programing language to know to the interview questions to prep for
• Millennium is on the hunt for engineers in Miami. A top tech exec for the $58 billion hedge fund details the firm's new training program.
• Inside Man Group's popular training program for non-tech employees that teaches them skills to automate tasks and reduce errors in their work

Other resources, including recruiter insight and how to dominate a 5-hour interview

• Inside the hedge-fund talent war: How elite funds are battling for star portfolio managers
• The talent brokers of quant trading: The headhunters at the forefront of Wall Street's systematic-trading and data-science hiring frenzy
• Try our searchable database of more than 350 Wall Street headhunters to find your dream job in private equity, investment banking, or hedge funds 
• Meet the Gatekeepers: The top private equity, hedge fund recruiting firms to get a buy-side job
• Inside the 5-hour psychological interview that can make or break your career at Citadel, Blackstone, and other finance titans 

• In a new podcast, billionaire Point72 founder Steve Cohen talks about the intangible values good investors have.
• Cohen, the owner of the MLB's New York Mets, spoke about how the level of discipline is similar to professional athletes.
• Investing at Point72 requires analysts to be in a "constant learning," he said.

The employees of billionaire Steve Cohen's two companies compete in different arenas.

The New York Mets, the Major League Baseball team Cohen has owned since 2020, play their games in front of tens of thousands of fans in Queens and opposing teams' stadiums. Meanwhile, Cohen's hundreds of portfolio managers and analysts at his $35 billion hedge fund Point72 are trying to beat the market and peers at firms like Citadel, Millennium, and more every day in offices around the world.

Cohen just handed out the largest contract in baseball, signing phenom Juan Soto to a 15-year contract that could pay him up to $800 million — but he expects the mindsets of the baseball players and traders on his payroll to be similar.

No matter the situation, there are key intangibles that an individual must have, Cohen said on a Point72 podcast with the firm's co-CIO Harry Schwefel. Good investors need to be opportunistic, vulnerable, passionate, and curious, but most importantly, like great athletes, they need to be disciplined.

"The talent in this industry is exceptional," said Cohen, wearing a gray New York Mets pullover, speaking about investment management.

To outperform, it's about "doing it day in, day out, no matter how it feels, how you feel." He spoke about how he hated weekends early on in his career because he wanted to trade and compete, comparing it to baseball players who, despite having a season that spans at least six months, can't wait for Spring Training.

Because of the discipline required by high-level sports, former college athletes have become a major recruiting ground for finance firms. A 2023 Harvard Business School study found Ivy League athletes "outperform their non-athlete counterparts in the labor market."

"Athletes attain higher terminal wages and earn cumulatively more than non-athletes over the course of their careers," the study found. Athletes also attain more senior positions in the organizations they join.

Point72 is a good example: Schwefel played for Harvard's hockey team.

In the conversation between the two, Cohen also revealed the questions he asks of any potential hire. He wants to understand "what makes them tick" and also how flexible they are.

"Do they want to be right or do they want to make money?" Cohen said. People who are right are "rolled over by the markets" all the time, he said, so a good investor has to be "constantly redefining who you are."

It's why at Point72, Cohen said, "constant learning" is mandatory for any employee. Once you find the area you're passionate about, he said, you have to be fully in it, improving every day, just like an MLB player or a pro golfer.

"This is pattern recognition and knowing what you're good at," he said about investing.

"Throw your best pitch."

• Bank of New York Mellon is a 240-year-old financial firm with $2.1 trillion in AUM.
• It also touches roughly 20% of investible assets around the globe through its various businesses.
• Here are the names of the 30 employees it just promoted to the top title of managing director.

Bank of New York Mellon Corp. on Wednesday promoted 30 employees to managing director, the bank's highest title below the C-suite. That's down from 44 managing director promotions last year as CEO Robin Vince seeks to transform the bank, including by setting a higher bar for rising in the ranks.

BNY is neither an investment bank nor a consumer bank, but it's one of the oldest and most important financial institutions on Wall Street. Founded by Alexander Hamilton 240 years ago, BNY is a custodian and administrator of $52.1 trillion for financial firms through its asset servicing business, clearance and collateral management, and other businesses. It also manages $333 billion in individual client assets through its wealth business and $2.1 trillion in assets through its investment and wealth management business segment.

Through its various commercial lines, including custody and treasury services, it touches roughly 20% of investible assets worldwide.

This year, 25% of the new class are from non-US locations, including locations the bank has targeted for growth, like Manchester, United Kingdom, Wroclaw, Poland, Dublin, Ireland, and India (both Chennai and Pune), according to a spokesperson.

Here are the list of names of BNY's newest MDs.

• Asset Servicing: Adam Watson, Fiona McNally, Ranjani Iyer
• BNY Wealth: Chad Johnsrud, Adam Innerst
• Chief Commercial Office: Christian Lewis, Paula Avraamides
• Clearance and Collateral Management: Parin Shah
• Credit Services: Shaf Hasan
• Engineering: Bhupendra Pudrohit, Christina Mackrell, Siva Hoskeri, Vikram Lalit
• Enterprise Transformation Office: Lauren Kozora
• Executive Office: Sarah Atkinson
• Finance: Jason Thomas, Jessica Casillo, Kimberly Perman, Sudipta Adhaya
• Growth Ventures: David Moss
• Markets: Ted Leveroni, Jeff McCormick
• Operations: Gerard O'Keefe, Janet Menezes, Katherine Mruczek, Nellie Ding, Sean Turner
• Risk and Compliance: Nicholas Fuller, Ryan Leader
• Treasury Services: Jeffrey Sander