As banks have reduced credit lines and shrunk their balance
sheets, funds with money to deploy have been looking for new
opportunities which will generate returns. Direct lending has
emerged as a solution for funds and more broadly, for the loan
markets.
The US is the most mature direct lending market, but Europe is
catching up and at TMF Group we're seeing growing interest in
Asia Pacific, Latin America and other emerging economies. It's
becoming a global phenomenon, with the Alternative Credit Council (ACC) stating that
it expects the global direct lending market to pass US$1tn by
2020.
New regulatory considerations, such as Basel IV, will help drive
this growth as the banks further retrench and reduce long term
credit exposures. Direct lenders also potentially have the appetite
to support companies with higher leverage, as they aren't
subject to the same capital requirement guidelines as banks. This
should mean more attractive returns for investors.
