The road less travelled

Lending to sponsored borrowers currently makes up the bulk of private credit transactions. Lenders are attracted to sponsored lending due to perceived better credit quality and faster capital deployment. However, as private equity adjusts to a higher rate environment, sponsored lending faces several challenges. Meanwhile, non-sponsored lending offers a less competitive space with high-quality borrowers. 

Non-sponsored lending requires a different origination approach and tends to be more labour-intensive and complex. For investors who can undertake the necessary analysis and forge the right partnerships, investing in non-sponsored lending could offer valuable portfolio diversification* and potentially attractive risk-adjusted returns.

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*It should be noted that diversification is no guarantee against a loss in a declining market.