As Bloomberg News reported Thursday (June 12), the companies have signed an agreement that lets them jointly invest in growing companies and the assets those companies originate, like consumer loans.
The report noted that private credit outfits have been seeking ways to carve out a greater slice of the $5.2 trillion asset-backed finance market, which involves debt backed by contractual cash flows stemming from defined pools of assets, such as mortgages or auto loans.
According to the report, the agreement lets Carlyle and Citi invest side-by-side in these startups, whether that’s through private debt or equity investments, and one day arrange their public asset-backed bonds.
Carlyle will team with Citi’s venture investing team Spread Products Investment in Technologies, (SPRINT) which specializes in FinTech investments.
“As these FinTech companies mature, they seek financing across both private and public markets,” Akhil Bansal, head of asset-backed finance at Carlyle, told Bloomberg. “With Carlyle’s ability to provide private capital financing and Citi’s to arrange public securitizations, we plan on covering their financing needs over their lifetime.”
The report noted that this agreement is the third Citi has made with an asset manager in the last 18 months to bolster its private credit holdings. The banking giant has formed similar pacts with Apollo Global Management and LuminArx Capital Management.
“AI is changing the FinTech space. These new specialty lenders are coming to us to grow,” said Rajiv Amlani, global head of private markets coverage at Citi. “Banks and private credit firms can work together and this is a prime example of it.”
The partnership comes at a time when younger consumers are increasingly turning to FinTechs for their financial needs, as PYMNTS wrote earlier this week.
Recent PYMNTS research finds that 54% of Generation Z individuals depend primarily on non-traditional financial service providers, “valuing real-time payouts and companies aligning with their social values,” that report said.
This shift has left FinTechs, as well as large banks and credit unions, adjusting their strategies to appeal to Gen Z.
“They want products aligned with their values, aligned with their lifestyle, and they want to be digitally present,” said Gavin Michael, CEO of digital-only Varo Bank, during a recent panel discussion with PYMNTS CEO Karen Webster.
For Varo, catering to Gen Z involves flexibility and transparency through products like Varo Advance, which provides short-term cash advances, and an artificial intelligence (AI)-powered line of credit.
“We’re underwriting these products based on cash flow, not traditional credit histories,” Michael added, stressing tailored offerings that match Gen Z’s lifestyle demands.
