Panel
Trends and Innovations in Middle Market Lending | Global Conference 2025
Milken InstituteManeet Ahuja, Cynthia Hardy Maasry, Ted Koenig, Timothy Lyne, Andrew Milgram, Cynthia Masry, Tim Line
- Economic activity is expected to remain stagnant with negative GDP prints in the first and second quarters, potentially pushing the market into a technical recession, causing portfolio CEOs to delay or cancel significant capital expenditure projects in favor of holding cash.
- Business activity may not pick up until the fourth quarter, with private credit volume anticipated to remain slow for the next six to nine months before direct lending returns significantly in 2026 and 2027.
- The credit secondaries market is projected to grow by more than 20% annually for the next few years, driven by liquidity needs among LPs and GPs, while a significant number of exits are forecasted for 2026 and 2027 for approximately 3,000 companies acquired in 2021 and 2022.
- Manager performance dispersion is expected to widen significantly, making manager selection paramount, with raised capital likely concentrating among the top 20 general partners.
- Credit quality is predicted to deteriorate sharply as business bankruptcies continue at a 14-year high, leading to lenders becoming the new owners of large portfolio portions due to an inability to wait for traditional exits.
- Private credit is forecasted to outperform private equity as hold periods for the latter extend from five to six years to eight to ten years, lowering their IRR, while private credit returns are expected to remain stable at 11% or 12%.
- Lenders and banks are expected to re-enter the commercial and industrial lending market, and investors may shift capital allocations from equity to credit as a response to the economic climate.
- Capital raised in the upper middle market is expected to gravitate back from the middle market as financing lower EBITDA businesses becomes uneconomical, while private credit's share within private credit allocations and overall portfolios is expected to continue increasing.