These 3 Top Financial Stocks Are Down As Much As 43.5% on Private Credit Fears. Here's Why I'm Buying Them Like There's No Tomorrow.

These 3 Top Financial Stocks Are Down As Much As 43.5% on Private Credit Fears. Here's Why I'm Buying Them Like There's No Tomorrow.
Brookfield (NYSE: BN), Blackstone (NYSE: BX), and KKR (NYSE: KKR) are three of the biggest alternative asset managers in the world. Brookfield and Blackstone have over $1 trillion in assets under management (AUM), while KKR ended last year with $744 billion in AUM. They invest in private equity, real estate, infrastructure, and private credit.
The high-profile bankruptcies of private credit borrowers First Brands and Tricolor late last year caused issues for private credit manager Blue Owl and raised concerns that a wave of defaults could hit the private credit sector. That has weighed on the share prices of Brookfield, Blackstone, and KKR, which have invested heavily in private credit. Both Blackstone and KKR are down about 43.5% from their 52-week highs, while Brookfield shares are off about 22%. I think the sell-off is a buying opportunity, which is why I've been loading up on these top financial stocks.
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What is private credit?
Banks have pulled back on lending over the years due to industry consolidation, increased regulation, and higher capital requirements. That has opened the door for non-bank financial companies to fill the gap by lending directly to companies. These private loans tend to be riskier, which is why banks aren't originating them. Default rates of private credit funds hit a record 9.2% last year, up from a record 8.1% in 2024. However, they have higher interest rates than other credit investments, compensating lenders for their higher risk profiles.
Several alternative investment managers have raised funds to grow their private credit portfolios. The industry currently has about $2 trillion in private credit AUM. That's double the level from 2020. Forecasters expect the private credit market to double again by 2030 to over $4 trillion in AUM.
Buying more of the best
The private credit situation could worsen, affecting Brookfield, KKR, and Blackstone. It has already had some impact on Blackstone, which manages a private credit fund open to individual investors (Blackstone Private Credit Fund or BCRED). Worried investors pulled $3.7 billion of capital out of the fund during the first quarter ($1.7 billion in net withdrawals after $2 billion in new commitments).
However, Blackstone has an exceptional track record of investing in private credit. The investment firm has delivered a 10% net annual return since it started investing in non-investment-grade private credit 20 years ago with minimal losses. That's double the return of the leveraged loan market. Blackstone's strong track record is why it now manages $520 billion in corporate and real estate credit assets, a 15% increase over the past year, even as private credit concerns grew. Blackstone noted that its portfolio is in excellent shape, with its borrowers delivering high single-digit earnings growth on average, enhancing their ability to repay their loans. That drives my high conviction that the sell-off in Blackstone's stock is a buying opportunity.