The world’s largest asset manager is looking to raise about $4 billion for the latest vintage of its Global Credit Opportunities fund, as the market for private credit instruments swells to more than $1 trillion.

BlackRock has already raised about $2 billion -- half of the targeted amount -- for the new private credit fund, according to a person with knowledge of the matter, who asked not to be identified discussing private information.

The vehicle will have a similar focus to BlackRock’s flagship GCO fund in that it will provide financing to borrowers shut out of traditional debt markets owing to financial distress, size or other factors. A representative for BlackRock declined to comment.

BlackRock reached final close on its GCO fund in 2019, raising about $2 billion of dry powder at the time. The fund focuses on less liquid investments, namely opportunistic, stressed and special situations transactions.

Such strategies have been rising in popularity in recent years among institutional investors seeking higher returns in a low-yield environment. Private credit funds have also gained ground in the leveraged loan market, where they have stepped up to finance leveraged buyouts and other deals typically funded by banks. 

Private credit funds are set to become the second-largest private capital asset class by 2023, trailing only behind private equity, according to research firm Preqin. By 2026, assets under management could reach $2.69 trillion, Preqin predicts.

BlackRock’s GCO fund is seen as a sister strategy to its Credit Alpha hedge fund, which is structured as an open-ended, long-short vehicle. Both Credit Alpha and the GCO fund are led by David Trucano, who joined BlackRock in 2012. He had previously worked as a managing director at Centerbridge Partners, which invests in distressed credit and private equity.

This article was provided by Bloomberg News.