When we began our career in the middle market four decades ago, we could not have anticipated its transformation to private debt, the hottest asset class in capital markets.
Back then being a lowly vice-president dedicated to smaller, non-public, non-rated, non-traded loans on the global syndicated finance desk at the great JP Morgan (then Chase Securities) was like being a short-order cook on the QE2.
We have been privileged to see those “little loans” transformed into a $1.3 trillion private debt universe rivaling both broadly syndicated loans and high-yield bonds in size. It is estimated that market will double to $2.7 trillion by 2027.
The vast majority of leveraged buyouts are now being underwritten and held by direct loan managers, with banks struggling to stay relevant. Those managers have raised enormous sums of capital from investors around the world. Private debt is now poised to become a core asset in any alternatives portfolio.