Private Debt: Search for Transparency (Second of a Series)

With the July 4th holiday weekend looming, readers of last week’s column on shark tracking have asked how they can keep informed of Cabot’s progress. That particular denizen of the deep was last heard from about two weeks ago off the coast of Bar Harbor, Maine. You can follow him at (

We continue this special series on surfacing features of private debt more observations from Cliffwater’s CEO and CIO, Steve Nesbitt. His recently published “Private Debt: Opportunities in Corporate Direct Lending” [link] covers the essentials of the asset class.

One interesting observation is on the scale of direct lending. Compared to $10 trillion of corporate debt, equity financing of $24 trillion, and $2.1 trillion in loans held by commercial banks, the direct lending universe is much smaller. Nesbitt estimates it at $400 billion.

Our own series on the size of the middle market [link] pegged the size of the middle market at between $400-500 billion. Ares’ 2018 study suggests a much larger number – $910 billion – extrapolated in part from their own pipeline. Other sources estimate it a $1 trillion.

Regardless it’s still small relative to the more liquid public markets. Yet according to Nesbitt about 180 managers invest in the direct lending market. And that number is growing. As we noted last week, despite the popularity of midcap loans since the Great Recession, transparency to the asset class remains a headwind.