Private Debt

Conclusion

The United States has witnessed and supported tremendous growth in financial assets over the past 50 years with a significant fraction smartly warehoused in pension plans, insurance companies, endowments, and foundations to provide for the future needs of the old, the young, and the needy. Few places elsewhere in the world have established the institutions and policies that grow, house, and protect this type of capital.

The 2008 global financial crisis (GFC) placed a severe strain on these institutions, not only creating historic losses in the value of assets held but also causing interest rates to fall to near zero. As a result, asset growth suffered, further jeopardizing the future obligations of these institutions. A recovering economy and stock market has helped, but fiduciaries know all too well that relying on stocks alone is too risky for their institutions' well‐being. As a result, a search‐for‐yield megatrend has manifested to find safe assets that throw off a steady stream of cash flow of at least mid to high single‐digit percentage levels that can help maintain institutional status quo.

During the same time, regulation and stepped up capital requirements forced commercial banks to step back from their leadership role of financing middle market companies. Private asset managers replaced them and introduced a new asset class called corporate direct lending. Its growing acceptance is helping fill the yield demands of investors.

Institutional investors seldom ...