Increased Optimism Expressed Towards Commercial Loan Origination (CLO) and Direct Lending Industries, According to Recent Survey Results
The 7th Annual Direct Lending Finance / CLO Forum in New York saw a gathering of over 225 professionals, with a diverse range of respondents, including investors, issuers, and service providers to the industry. The event, hosted by CIB, provided a platform for insightful discussions and analyses, with the major findings presented by SPG Americas (Securitized Products Group).
The survey conducted at the event revealed a prevailing sentiment that participants are preparing for a dynamic and evolving landscape in the Direct Lending and CLO sectors. Nearly half of the respondents (48.15%) predict that risk premiums will widen in the CLO market, indicating a potential shift in market dynamics.
However, the survey also suggests a cautiously optimistic picture of the direct lending market and the related Private Credit/Middle Market CLO market. A significant number of respondents expect a modest acceleration in M&A activity in the near to mid-term. 48.15% of respondents anticipate a modest increase in the interest for third-party equity in Direct Lending CLOs, and 54.32% expect a similar increase in the acceptance and usage of Rated Feeder structures.
The survey results also indicate expectations of increased M&A activity in the near to mid-term, with 76.54% of respondents expecting consolidation in private credit, pointing towards a trend towards a more concentrated market. This trend is evident in recent acquisitions made by institutions like Blackstone, KKR, and Apollo Global Management, who have expanded into direct lending and private credit markets.
BlackRock's purchase of HPS Investment Partners, Blue Owl Capital's acquisition of Kuvare Asset Management and Atalaya Capital Management, and Wendel Group's acquisition of Monroe Capital are just a few examples of this consolidation trend.
The conference featured 24 speakers from various fields, including direct lending originators, financing professionals, private equity sponsors, economists, investors, and Chief Executive Officers. The discussions were focused on alternative sources of capital to direct lenders beyond traditional CLOs, LP/GP structures, and BDCs.
In conclusion, the survey results and discussions at the CIB 7th Annual Direct Lending Finance / CLO Forum in New York paint a picture of a market that is preparing for change, with a cautious optimism about the future of direct lending and CLO markets. The trends towards consolidation and the increasing interest in alternative sources of capital and rated feeder structures suggest a market that is evolving to meet the challenges of the future.
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