Glossary › Direct lending
Direct lending refers to loans that funds grant directly to mostly mid-sized companies, without a bank or exchange in between.
Since banks became more strictly regulated after the financial crisis, credit funds have taken over a large part of corporate lending, above all for buyouts by private equity firms. The loans are mostly senior secured and floating-rate; the interest consists of a reference rate plus a spread. Regular interest payments make direct lending the highest-yielding pillar of many semi-liquid credit funds.
The risks lie in the quality of the borrowers. When rates rise, debt service becomes more expensive and weaker companies come under pressure. Things to look at are the share of senior loans, the average leverage of borrowers, the number of non-performing loans and whether interest is paid in cash or added to the loan. Many of these figures are on the fund pages.
28 of the 139 active funds name direct lending as their strategy; the private credit asset class comprises 36 funds. The ongoing costs of the direct lending funds are 2% a year at the median.
Direct lending funds (alphabetical) · as at 16 Oct 2026