Brookfield Asset Management Ltd. (TSX:BAM) is in advanced talks to buy a majority stake in $22 billion private credit manager Castlelake, L.P. as the world?s second-largest alternative investment manager uses acquisitions to push further into lending and debt investments that are benefiting from higher interest rates. The deal under discussion would see Brookfield invest more than $1.5 billion to buy a majority interest in Castlelake and make a large investment in its funds, three people briefed on the matter told the Financial Times. Brookfield and Castlelake declined to comment.

The talks between Brookfield and Castlelake, which are in a late stage but could still fall apart, come on the heels of consolidation in credit markets. Some of the biggest private equity and asset management groups - including TPG, BlackRock, T Rowe Price and CVC Capital Partners - have recently acquired credit managers as they look to diversify their assets. Castlelake would sit in Brookfield?s recently formed credit unit, which also houses a controlling interest in Oaktree Capital Management.

Castlelake has taken advantage of recent market turmoil to expand its credit portfolio beyond aircraft leases, buying up billions of dollars of consumer instalment loans from fintech group Upstart. Castlelake?s management team is expected to retain the majority of the carried interest the firm generates and it will operate independently from Brookfield. But the $900 billion-plus Canadian-investment manager is likely to inject further capital into its funds, just as it does with Oaktree.