RT Journal Article
SR Electronic
T1 Practical Applications of Direct Lending: Evidence from European and US Markets
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP jai.2022.jaipa055
DO 10.3905/jai.2022.jaipa055
A1 Laura Fritsch
A1 Wayne Lim
A1 Alexander Montag
A1 Martin C. Schmalz
YR 2022
UL https://pm-research.com/content/early/2022/02/22/jai.2022.jaipa055.abstract
AB In Direct Lending: Evidence from European and US Markets, from the Winter 2022 Due Diligence Special Issue of The Journal of Alternative Investments, Laura Fritsch, Wayne Lim, Alexander Montag, and Martin Schmalz, all of Oxford University, contribute to the nascent literature on direct lending by using various sources of data absent from other studies. The direct lending market has grown considerably in recent decades, and the authors provide empirical support for the likely reasons. These growth drivers provide insights into the supply of, and demand for, direct lending capital and its future market growth.The authors found that the volume of private debt deals has grown as borrowers pursued opportunities in the direct lending market. Investors supplied capital to the market, whose yields were higher than those of corporate bonds with similar risk. The authors found that changes in banking since the financial crisis contributed to the growth of direct lending as an alternative source of funds. Private loans provided a substitute for the declining number of bank loans. However, in a sample of loans from a major direct lender, the authors found that nearly half of the loans had banks as co-investors, suggesting that direct lending also plays a complementary role to bank lending.