The European private corporate loan market is vast (about €4.5 trillion outstanding1) and diverse, spanning all industries, market-leading companies of varying size and 20 different eurozone markets. Over the past decade, the market has grown and evolved considerably, and today provides domestic and foreign institutional investors with direct exposure to a new (non-public) universe of specialist companies and industries, as well as attractive absolute and relative value investment opportunities versus public markets.
While the universe of companies accessing private loans ranges in size, the investment opportunity is most distinctive in mid-market companies (€100 million to €5 billion in revenues). These private companies are globally competitive, domestic and regional champions, collectively forming the core of Europe’s economy.
In this new white paper, providing an introduction to the market and asset class, we explore the benefits of investing, which include:
- Diversification: These private, mid-market companies span industries and geographies, forming a distinct asset class that delivers uncorrelated returns to public credit markets.
- Quality: Well-established, globally competitive, specialist product manufacturers and service providers that have stable business models and conservative financial profiles ranging from BB to A flat (with an average rating of BBB).
- Yield: An asset class that generally offers a spread pick-up of 200 basis points over equivalent public loans and bonds.2
- Protection: Loans are typically structured with financial maintenance and non-financial covenants to ensure alignment between borrower and lender and to mitigate risks.
