Q2 Direct Lending Market Observations

The direct lending market is shifting due to high interest rates and increased competition among large asset managers. First-lien lenders are seeing strong returns, while large-cap lending faces tighter margins and higher risks. Private equity firms are driving a surge in mergers and acquisitions, adapting to the prolonged high-rate environment. Investors are turning to clean-slate portfolios and focusing on the lower middle market to mitigate risks and capitalize on new opportunities.