Cloud 9fin
The case for lower middle market lending
Nov 27, 2024
Michelle Handy, Chief Investment Officer of Direct Lending at First Eagle Alternative Credit, shares her expertise in lower middle market lending. She discusses the challenges of intensifying competition and a complex macroeconomic landscape. Handy highlights asset-based lending as a promising strategy and emphasizes the critical role of strong sponsor relationships during turbulent times. Additionally, she dives into the nuances of covenant negotiations and the impact of retail capital on the lower middle market, shedding light on investment prospects and risks.
13:32
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Quick takeaways
- The influx of capital into private credit raises concerns about underwriting standards, highlighting the need for careful evaluation of managers' strategies.
- Asset-based lending offers opportunities in a low M&A environment, focusing on diverse collateral types to generate deal flow amid market fluctuations.
Deep dives
Concerns about Capital Influx
The influx of capital into the private credit market raises concerns about potential impacts on underwriting standards and portfolio quality. As more investors enter the asset class, it becomes crucial to evaluate the underlying strategies of different managers. There are worries that excessive capital could dilute the quality of investments, which makes it essential for investors to analyze strategies and capital suitability. This scrutiny may help investors identify whether to be cautious about specific managers and their approaches.
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