The US personal credit score market is poised for continued development as lending demand broadens from mid-market corporations to smaller companies, and institutional traders increase allocations to the asset class, in accordance with Josh Niedner, chief government of Apogem Capital LLC.
“You’ll be able to see tens of hundreds of companies within the US exist within the personal market at scale,” Niedner stated in a keynote speech on the ASK 2025 World Different Funding Convention in Seoul on Oct. 29.
“And under that, lots of of hundreds of small and medium-sized companies are rising. What you’ve got is an unlimited set of alternatives for US direct lending to handle.”
The enlargement comes because the variety of publicly listed corporations within the US continues to shrink.
“During the last 25 years, the variety of publicly listed corporations within the US has steadily declined, whereas the variety of personal equity-owned companies has steadily elevated,” Niedner stated.
“These developments don’t seem like slowing down or leveling off.”
INSTITUTIONAL DEMAND RISES
Personal credit score fundraising has surged over the previous decade, with annual inflows of $200 billion to $300 billion lately, in accordance with Apogem’s information. But allocations to non-public credit score stay comparatively small in institutional portfolios.
“Regardless of all of that capital coming into the market lately, it nonetheless represents a reasonably small portion of allocations amongst institutional traders,” Niedner stated.
“That’s one piece of proof that there’s room to run and room for development.”
COOLING ACTIVITY, BUT SUPPORTIVE CONDITIONS
Niedner acknowledged that deal exercise has softened for the reason that increase of 2020-2021, when low rates of interest and authorities stimulus through the pandemic period drove report lending volumes.
“Inflation worries began to occur, and also you had charge hikes start, which launched uncertainty and constricted quantity,” he stated. “There was a modest rebound in mid-2024, however volumes have dipped once more this yr. Nonetheless, as charge uncertainty fades, we count on quantity to select again up.”
PROVEN RESILIENCE
Regardless of issues over the chapter of a US auto elements maker, Niedner emphasised the sturdiness of the asset class.
“We’ve 20 years of knowledge to level to, and US direct lending has actually outperformed very persistently and by a reasonably huge margin among the different fixed-income alternatives,” he stated.
“Even with a number of completely different interest-rate environments and macroeconomic climates, and COVID, US direct lending has demonstrated very robust returns over all that point.”
He added that spreads and borrower efficiency stay steady.
“Median income and EBITDA development over the lots of of investments that now we have in our portfolio has remained persistently robust quarter over quarter for the final a number of years,” Niedner stated.
“It might seem that the addressable alternative set in US direct lending stays wholesome from a monetary standpoint.”
Niedner stated the case for US direct lending stays robust.
“It’s a market that continues to increase, supported by corporations with stable fundamentals and a 20-year report of regular, low-volatility returns,” he stated.
Apogem Capital CEO added that, whilst new methods emerge throughout personal credit score, “core US direct lending nonetheless affords some of the sturdy alternatives out there.”
Apogem Capital, a US-based different funding supervisor below New York Life Investments, oversees about $40 billion in property as a part of the guardian firm’s roughly $800 billion platform.
It focuses on US personal property throughout direct lending, multi-manager and secondary methods, GP stakes and personal actual property, with its core mandate centered on direct lending to corporations within the core and decrease center market.
