Morningstar, PitchBook jump into private credit portfolio monitoring with Lumonic acquisition

Morningstar has acquired Lumonic, a private credit portfolio monitoring platform, paving the way for its subsidiary PitchBook to expand its role in the private capital markets.

The deal marks PitchBook’s entrance into portfolio monitoring for GPs, starting with private credit, with an eye toward expanding into private equity and venture capital down the line. The Lumonic acquisition follows consolidation among software and data providers keen to serve private markets with end-to-end investment solutions.

“This deal squarely positions us at the center of the private capital markets,” said Rod Diefendorf, president and COO of PitchBook.

Terms of the deal were not disclosed. Lumonic will remain a standalone product, and the company will operate as a subsidiary of PitchBook led by its founding team.

Lumonic enables private credit asset managers to streamline covenant review and compliance workflows between lenders and borrowers. The company’s data ingestion and AI-driven portfolio analytics tools simplify the cumbersome process of tracking the financial health of private credit investments and ensuring compliance.

The two-year-old company has grown quickly and assembled a client roster of leading private credit firms, including Avante, Avenue Capital, Trinity and Hercules. First Round Capital led a seed round for Lumonic, which was also backed by January Capital, John Markell, founder of credit shop Armentum Partners, and Henry Ward, CEO of cap table management platform Carta, among others.

The tie-up with PitchBook allows Lumonic to tap into the company’s deep bench of GP clients.

“PitchBook can help us grow a lot faster,” said Kevin Hsu, CEO and co-founder of Lumonic.

Portfolio monitoring push

Financial services leaders have struck several deals in recent years to add portfolio monitoring to their private market offerings.

Last year, BlackRock paid $3.2 billion in cash to buy Preqin, a PitchBook competitor. In doing so, the asset management giant sought to pair Preqin’s data with eFront, a private market investment platform that’s part of its Aladdin tech ecosystem.

In 2021, FactSet acquired private capital portfolio monitoring platform Cobalt. Credit ratings giant S&P operates iLevel, another portfolio monitoring tool for private investments.

Riding the private credit wave

In acquiring Lumonic, Morningstar and PitchBook are expanding further into credit markets three years after the $650 million acquisition of LCD from S&P.

During that time, the private credit market grew rapidly as Wall Street banks retreated from risk in 2022 and 2023 amid steep interest rate hikes and recession fears. Starting in 2024, banks providing syndicated loans began to re-embrace risk, heightening the competition with direct lenders.

Private debt funds now manage more than $1.6 trillion, according to PitchBook data. Asset managers have grown their private credit businesses both through traditional fundraising and by acquiring specialists. Last year, BlackRock acquired credit manager HPS Investment Partners for $12 billion in an all-stock transaction.

As the market has matured, GPs and LPs increasingly need better technology to manage their swelling portfolios of private credit assets. The status quo often involves manually tracking financials through email and spreadsheets.

Hsu said the relative difficulty of portfolio monitoring in private credit should make it easier to eventually expand Lumonic’s platform to other asset classes, adding:

“We wanted to solve for the most complex asset class first.”