Key Takeaways
- • Sponsor-backed private equity deals account for about 70% of the global direct lending market and roughly 90% in Europe, according to a Morgan Stanley figure cited in the piece, prompting allocators to seek diversification through non-sponsored credit.
- • P Capital Partners (PCP), a Stockholm-headquartered manager, has completed almost 200 transactions over 20 years and manages more than €3.5 billion ($3.9 billion) in private credit focused on family-owned and entrepreneur-led mid-sized companies.
- • PCP's average portfolio leverage was 3.7 times in Q1 2026, versus 5.5 times for sponsored direct lending and 5.4 times for broadly syndicated loans, while European non-sponsored margins have recently surpassed those of both comparators.
- • Bank retreat from non-standard lending, driven by regulation and balance sheet optimisation, has widened the financing gap for mid-sized firms and supports demand for specialist non-sponsored lenders.
- • The piece, published as partner content by M&G Investments, argues non-sponsored credit is a complement to sponsor-backed lending, not a replacement, and that due diligence should focus on manager-borrower overlap, sourcing, covenant effectiveness and cycle-tested experience.
Summary
According to a partner article published on AsianInvestor and authored by M&G Investments, private credit has grown substantially since 2008, but sponsor-backed lending dominates the global direct lending market with a 70% share, rising to around 90% in Europe. The article argues that allocators seeking diversification should consider European non-sponsored credit, which it describes as a complement to, rather than a replacement for, sponsor-led lending. The risk and return drivers differ, as does the typical borrower, and the authors state that non-sponsored credit is "neither better nor worse" than sponsor lending, but simply different.
Non-sponsored lenders finance family-owned and entrepreneur-led businesses across different borrowers, sectors and geographies, earning a premium for bespoke origination and structuring. The article attributes the opportunity partly to banks' retreat from transactions outside standard lending criteria, driven by regulation and balance sheet optimisation. Family owners may be asset-rich but cash-constrained, preferring flexible debt to equity dilution, and the article contends that tighter bank regulation is likely to sustain the present financing gap for many mid-sized firms.
The article uses PCP as a case study. PCP, a Stockholm-headquartered private credit manager, has completed almost 200 transactions over the last 20 years and manages more than €3.5 billion ($3.9 billion). PCP's average portfolio leverage was 3.7 times, compared with 5.5 times for sponsored direct lending and 5.4 times for broadly syndicated loans in Q1 2026, according to figures the article attributes to Pitchbook LCD and Carlsquare. Margins in European non-sponsored credit have recently surpassed those for direct lending and broadly syndicated loans despite lower leverage, which the article attributes to complexity and flexibility commanding higher pricing.
On exposures, the article notes that around 55% of European direct lending volume has gone to the UK and France, and that technology represented about 30% of European direct lending issuance in 2025, a concentration it links to add-backs, covenant-lite structures and AI-related disruption risk for software borrowers. Non-sponsored deals in creditor-friendly jurisdictions such as the Nordics, the Netherlands and Ireland are presented as a source of diversification. Without a sponsor filter, non-sponsored loans can carry full financial covenants, information rights and board observer seats, enabling closer monitoring, according to the article.
For institutional investors, the article frames the key question as whether an allocation introduces genuinely different exposures with credible downside protection. It recommends diligence on manager-borrower overlap, sourcing capabilities, covenant effectiveness and lending experience across economic cycles. The article is partner content and carries M&G's standard disclaimers; it does not constitute investment advice, and past performance is not indicative of future results.
Non-sponsored lenders finance family-owned and entrepreneur-led businesses across different borrowers, sectors and geographies, earning a premium for bespoke origination and structuring. The article attributes the opportunity partly to banks' retreat from transactions outside standard lending criteria, driven by regulation and balance sheet optimisation. Family owners may be asset-rich but cash-constrained, preferring flexible debt to equity dilution, and the article contends that tighter bank regulation is likely to sustain the present financing gap for many mid-sized firms.
The article uses PCP as a case study. PCP, a Stockholm-headquartered private credit manager, has completed almost 200 transactions over the last 20 years and manages more than €3.5 billion ($3.9 billion). PCP's average portfolio leverage was 3.7 times, compared with 5.5 times for sponsored direct lending and 5.4 times for broadly syndicated loans in Q1 2026, according to figures the article attributes to Pitchbook LCD and Carlsquare. Margins in European non-sponsored credit have recently surpassed those for direct lending and broadly syndicated loans despite lower leverage, which the article attributes to complexity and flexibility commanding higher pricing.
On exposures, the article notes that around 55% of European direct lending volume has gone to the UK and France, and that technology represented about 30% of European direct lending issuance in 2025, a concentration it links to add-backs, covenant-lite structures and AI-related disruption risk for software borrowers. Non-sponsored deals in creditor-friendly jurisdictions such as the Nordics, the Netherlands and Ireland are presented as a source of diversification. Without a sponsor filter, non-sponsored loans can carry full financial covenants, information rights and board observer seats, enabling closer monitoring, according to the article.
For institutional investors, the article frames the key question as whether an allocation introduces genuinely different exposures with credible downside protection. It recommends diligence on manager-borrower overlap, sourcing capabilities, covenant effectiveness and lending experience across economic cycles. The article is partner content and carries M&G's standard disclaimers; it does not constitute investment advice, and past performance is not indicative of future results.
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