The Rise of Private Markets

28 February 2020

Secular Trends in Non-Bank Lending and Their Economic Implications

Many financial commentators have recently suggested that the strong growth of the non‐bank corporate lending market is a short‐term, cyclical trend that could threaten the stability of our financial system. In our view, the growth of the non‐bank market can be explained by a long‐term shift toward private capital as banks and public markets have transitioned from serving small and medium‐sized companies to larger companies over the past several decades.

This paper discusses the phases that have led to the evolution of the non‐bank corporate market and why we believe it serves a critical function in providing capital to growing middle market companies. We believe that a better understanding of these changes provides context to the growth and market share gains of non‐bank corporate lending. Our conclusions are based on proprietary insights that we have gained over the past two decades operating as one of the leading U.S. private credit managers.