How much has been raised to support non-bank direct lending in Europe? Figures are often cited in the media without asking related questions such as “What are they raising?” or “What’s their strategy?” Preqin recently reported about €31 billion was raised last year for “private debt.” Of that roughly 60% was for direct lending, with the rest going to junior capital, distressed, and special situations (see Chart of the Week).

Well-regarded platforms like Blue Bay (a subsidiary of RBC) and Hayfin (backed by Towerbrook) have recently raised about €2 billion each. ICG, a global mezz fund, is said to have raised €3 billion for senior debt. Other large investment managers in the mix include Ardian (formerly AXA Private Equity), Ares, Alcentra, Apollo, BlackRock, and Guggenheim. But given, as we’ve demonstrated, how banks have remained at the center of gravity for leveraged lending, what’s the path to success for these firms?

One route in the US oft-followed by opportunistic credit is to take advantage of pricing discounts in the secondary loan market. We certainly saw that in spades with select US buyouts that got caught in the 4Q market downdraft. Indeed, some European direct lenders bought into these deals. But, as one top manager told us, it’s too early to tell if prices on these assets will hold, or if buyers are sitting on mark-to-market losses.

In general, European loan prices are less subject to technical swings. For one thing, as our friend pointed out, there are no retail loan funds in Europe. Mutual funds, so-called “UCITS” (Undertakings for Collective Investment in Transferable Securities), cannot hold loans directly. That means there’s no need for daily liquidity, no wild swings of cash coming in and out of accounts, no relative value players driving prices up and down. This results in a much more stable market overall in Europe.

CLOs also aren’t trading assets,