Private Debt: Opportunities and Trends in the lower mid-market

In 2024, private debt offers significant potential for investors seeking robust risk-adjusted returns. With ongoing bank disintermediation, the lower middle market remains underserved, providing opportunities for lenders to demand premiums and enhance performance.

As smaller banks tighten lending, private lenders fill the financing gap, particularly in regions like the United States. Middle market growth strategies, such as "buy & build," are gaining traction, especially in Europe and the US, offering dynamic investment prospects.

Private debt emerges as the preferred capital source amid scarcity in high-yield bond markets, both in Europe and the US, while also gaining prominence in Asia. Despite a slowdown in financial sponsor deal flow due to economic uncertainty, lenders with independent origination capabilities stand to benefit.

Additionally, private lenders play a crucial role in the transition to clean energy, supporting companies in their ESG journey. Overall, private debt remains an attractive asset class, providing lower risks, higher returns, and diversification benefits for investors.

The information in this article is derived from online research and internal resources of Menara Capital Ltd.