Seeking Safety in Middle Market Lending
The private debt market has expanded over the past decade, as institutional and high-net-worth investors, disappointed by falling bond yields, have sought corners of the fixed income market where robust returns may still be available. Institutional money has poured into middle market private debt funds, and new firms have entered the market. Despite somewhat frothy conditions, experienced lenders are still finding attractive opportunities. We think senior loans continue to offer the most attractive risk/reward profile, but investors need to ascertain that loans labeled “senior” truly deserve that designation.