Direct lending by specialist managers, as an option to borrowing from banks, is a growing form of financing. The asset class now exceeds $1 trillion, and is expected to continue to grow at a low-double-digit rate for the next several years.
Filling a void for both borrower and the investor
Many high-quality companies are too small to access public debt markets, and find that bank lending is also geared towards larger companies. Some are finding that skilled specialist managers can better adapt to their financing needs.
On the asset side of this non-bank lending channel, the relatively higher yield on pools of direct loans provide an attractive investment.
Insurers, particularly, may find specific advantage in the high yields, stricter documentation, and below-average regulatory capital requirements.