Voya Investmen… - Tue, 04/16/2024 - 14:57

Private Credit Insights: The Collateral Crunch (and How to Avoid It)

In a land of middle market mega-funds, exposure to low-collateral, private-equity-driven investments could become an issue—yet this is readily addressable with diversification into a higher-collateral specialist fund. Plus: smart ways to play commercial mortgage lending now.

Key takeaways

  • A sharp contraction in private equity liquidity, plus an oncoming maturity wall, could impact middle market lenders with large allocations to software, services and other low-collateral businesses.
  • Strategies with a higher-collateral focus, low reliance on PE sponsors, and the ability to access project finance and private placement deals will increasingly provide important diversification from the herd.
  • Despite the dismal office market and doom-laden headlines, select commercial mortgage lending strategies outperformed last year. This year has further upside potential.

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