As the year has progressed, there’s been a growing bifurcation between the level of activity from middle market pure loan buyers and that of larger credit managers.

Funds with less capacity have limited origination capability. They typically get product from loan syndicators, only able to hold tickets in the $10-40 million range. By contrast, a select club of direct lenders are sourcing product directly from relationship sponsors, and are able to comfortably hold north of $100 million per transaction.

The disparity in these strategies is driven by two trends. First, fundraising has enhanced the ability of managers to hold a greater loan commitment among multiple pockets – Cargo Pants! – without compromising borrower diversity per vehicle.

At the same time, private equity firms are trimming back the number of lenders they choose to deal with. We spoke to one Midwest sponsor who told us, “Yes, we’re focused on getting the most out of our current relationships. Things change. Some lenders are not as responsive as the competitiveness of our market has sharpened.”