Direct lenders have proved the doubters wrong. This is especially true across the European leveraged finance market that was, until recently, controlled by traditional banks. The inroads made by private debt funds in a few short years have been impressive.
Even more striking is how these funds have taken the pandemic period in their stride. Following the market freeze in the first half of 2020, debt funds dived back into the market at a frenetic pace. Fundraising and dealmaking both set new records in 2021 and the space has never looked in better shape.
Last year's boom in activity was spurred by historic levels of private equity (PE) deal flow and the unique ability of direct lenders to meet the needs of financial sponsors. Debt funds have been willing to give companies the necessary breathing room to operate during this period of uncertainty and instability. And there is little sign of sponsors slowing down either, which stands direct lenders in good stead for 2022.
In this report, we look back over a year of abundance and outline what can be expected as we head in to the third year of a pandemic that is increasingly proving to be an endemic challenge. We will also go in-depth on the current state of the direct lending market, how the monetary-tightening environment might benefit private debt investment strategies and the increasing role that ESG is playing in these loans. Direct lending has gone mainstream. There's no going back now.