Direct Lending: Evidence from European and US Markets

Abstract

Led by the growth of direct lending, private debt assets under management almost tripled over the past decade. What do we know about this shift and why it has happened? Using a proprietary dataset, the authors present new empirical facts about direct lending funds and investigate the demand and supply drivers that likely have contributed to their growth. They identify the following contributing factors to the growth of direct lending: reduced capital supply by banks due to M&As and regulation; financial innovation; changing borrower needs; changing borrower types; and a low-interest-rate environment.