Royal Bank of Canada is in talks with several fund providers to steer individual investors into the burgeoning private-credit market.

The discussions include Brookfield Oaktree Wealth Solutions and Blue Owl Capital Inc., among others, people familiar with the matter said. These firms have become a bigger source of financing to companies as banks retrench from risky lending. RBC’s goal is to bring hard-to-trade corporate debt -- and the promise of higher returns than plain vanilla bonds -- to its clients.

Bank executives are exploring ways to give financial advisers and wealthy individuals ways to park cash in existing funds of alternative-asset managers. Money raised from RBC clients will be deployed immediately rather than committed for future investment, one of the people said, and the bank plans to begin offering such funds to customers later this year. 

A spokesman for Toronto-based RBC didn’t comment. Blue Owl and Brookfield Oaktree parent Brookfield Asset Management declined to comment.

RBC is asking asset managers to provide share classes of funds denominated in Canadian dollars to allay financial advisers’ concerns about exposing clients to foreign currencies, another person said. Many smaller U.S. firms aren’t equipped to hedge foreign-exchange risk. 

In January, New York-based Blue Owl announced it was giving accredited investors in Canada access to a lending business-development company.  

The largest institutions, seeking higher yields amid a decade of low interest rates, have pumped money into private credit. Their money has given firms such as Brookfield and Blue Owl the firepower to displace banks in financing North American companies. The arrival of smaller investors will give private credit added heft.

The private-debt market is exploding in popularity, with assets under management for the segment roughly doubling over five years to more than US$1 trillion in 2021, according to data provider Preqin.