A series of mammoth investor tie-ups aimed at financing corporate buyouts is upending the world of direct lending, a corner of the credit market once dominated by boutique funds.
Tuesday’s announcement of Mubadala Investment Company’s new $3.5 billion direct lending partnership with Barings follows the Abu Dhabi sovereign wealth fund’s earlier $12 billion venture with Apollo Global Management. Last week also saw Credit Suisse reveal its new multi-billion dollar direct lending partnership with the Qatar Investment Authority.
Growing scale, driven by voracious investor appetite, is what has seen private credit balloon into an $850 billion market. The tie-ups guarantee investors access to private credit, while the managers get an immediate burst of firepower. In the case of Credit Suisse, and to a lesser extent Apollo, it’s a way of accelerating from an almost standing start to rivaling the size of the biggest direct lenders. Many private credit shops have spent a decade building up the capacity to make $1 billion loans.
“It’s an absolutely natural development,” said Jeff Griffiths, principal and co-head of private credit at Campbell Lutyens, which advises managers on raising capital from investors. “I’m surprised actually we haven’t seen more of it earlier with respect to larger investors taking an ownership position in a manager and then giving that manager capital to invest.”
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