Direct Lending: Evidence from European and U.S. Markets

Abstract

Led by the growth of direct lending, private debt assets under management almost tripled over the past decade. What do we know about it and why has it grown? Using a proprietary dataset, we present new empirical facts about direct lending funds and investigate the demand and supply drivers that have likely contributed to its growth. We identify the following contributing factors to the growth of direct lending: capital supply due to a shrinking banking sector due to mergers and acquisitions and regulation; financial innovation; changing borrower needs; changing borrower types; and a low-interest-rate environment.

Keywords: Private Debt; Direct Lending, Banking Regulation, Non-bank Lending, Private Markets, Private Equity, Lending, Alternative Assets

JEL Classification: G2, G23, G21, G18, G11, G10