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Alternatives Rock

The European alternative lending space has deepened considerably over the last few years, with many new players entering the market. Vicky Meek asks is there scope for further growth?

The pool of capital available for direct lending in Europe has increased markedly over the past three years. Last year was not only a record year for fundraising on the continent, at nearly $19bn, but 2015 was also the first year Europe surpassed the US (which raised just under $15bn), according to Preqin/Credit Suisse Private Fund Group figures. And while some direct lending funds have now raised successor funds – such as Bain Capital, Ares, ICG and Bluebay – the last 12-18 months has seen some new entrants to the European direct lending market, including GSO, Pemberton and EQT.

These figures, contained in the latest Deloitte Alternative Lender Deal Tracker, demonstrate appetite not only among the limited partner community for direct lending investments, but also the demand on the ground in many European markets.

In the first quarter of 2016, 63 mid-market direct lending deals were completed across Europe, up from 55 in the same period in 2015, with the UK and France accounting for 20 and 22 of these deals, respectively. “We are seeing a 10-15-year secular shift, from banks providing debt finance to companies in Europe towards a fund-based solution,” says Paul Shea, co-founder of Beechbrook Capital.

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