(Bloomberg) -- Yesterday they dealt in distressed debt, today they’re battling to establish credibility as plain-vanilla lenders.

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Money managers once known for providing capital to businesses that couldn’t get bank financing are vying to lend to the world’s top-rated companies.

Blackstone Inc. has more than $90 billion of investment-grade private credit assets, up roughly 40% from a year ago. The firm expects that to grow.

Apollo Global Management Inc. manages roughly $275 billion of investment-grade credit. Its “high grade capital solutions” business — a key plank in the firm’s growth strategy that focuses on multibillion-dollar corporate deals — has originated about $100 billion in the past four years.

In the past, private credit typically involved money managers lending to rivals’ portfolio companies that couldn’t readily tap public bond and loan markets. They were financing buyouts and dealing with businesses that were smaller and too leveraged for banks to touch.

Those same alternative asset firms are focusing on bigger, sturdier businesses — and their reserves of equipment, property and other collateral. These aspirations put firms such as Blackstone and Apollo more squarely into banks’ terrain, advancing money managers’ efforts to grab dollars and clout from Wall Street.

But rather than using depositors’ cash for financing, asset managers are turning to insurers drawn to the allure of extra yield from private markets. Insurers have vast sources of permanent capital they want to park in investment-grade-rated assets, and alternative asset managers can expand their own businesses by meeting this need.

Continued Evolution

The insurers’ thirst for investments puts more focus on how those assets are rated.

In the past few years, Kroll Bond Rating Agency has rated as investment-grade $20 billion of debt secured by cash flow from corporate assets. Those numbers speak to the rise of nonbanks that can do these kinds of highly negotiated deals with borrowers.

“It’s an important step in the continued evolution of the capital markets,” said Bill Cox, KBRA’s global head of corporate, financial and government ratings.

In the first nine months of 2024, Blackstone originated or placed $38 billion of financings — with a blended A-rating — for private investment-grade-focused clients. That’s up 70% from a year ago. Insurers often need assets to be rated at least single A.