The pact is a further sign of the rise of private credit globally as an asset class.

Citigroup and New York-listed alternative investments firm Apollo have entered into an exclusive pact for a subsidiary of Citi and certain affiliates of Apollo to form a landmark $25 billion private credit, direct lending programme, initially in North America.

The firms expect the programme will finance around $25 billion of debt opportunities over the next several years, encompassing both corporate and financial sponsor transactions.

The partnership may eventually expand to other countries beyond the US, Citigroup and Apollo said in a statement last Friday.

The arrangement comes at a time of continued growth in private credit as an asset class in recent years, although it has also prompted risk concerns from the International Monetary Fund, and suggestions that the sector is becoming over-hyped.

Abu Dhabi-based Mubadala Investment Company, a sovereign wealth fund, is involved in the partnership.

The programme is designed to widen access for corporate and sponsor clients to the private lending capital pool.

“This exciting project brings Citi together with Apollo and other best-in-class partners to offer a full suite of innovative, private financing solutions to our clients,” Viswas Raghavan, head of banking and executive vice chair at Citi, said. “Combining the strength of Citi’s banking and capital markets franchise with Apollo’s deep capital resources will provide clients with a range of options to meet their evolving financing needs and achieve their strategic goals.”

Cravath, Swaine & Moore serves as legal counsel and Citigroup Global Markets Inc acts as advisor to Citi; Paul, Weiss, Rifkind, Wharton & Garrison serves as legal counsel and Sullivan & Cromwell is serving as regulatory counsel to Apollo.

The partnership joins Citigroup with a firm overseeing about $696 billion of assets under management, as at the end of June this year.

According to a new report by Barclays Private Bank, global closed-end private capital funds had assets under management of $14.7 trillion as of 2022, a figure projected to reach $19.6 trillion by 2028. These funds have collectively raised nearly $2 trillion in additional fresh capital since the beginning of 2023, the bank said.