Key Takeaways
- • Direct-lending funds raised $129.15 billion in the first nine months of 2026, up 35% from a year earlier and the highest nine-month total in Preqin data going back to 2016.
- • Estimated third-quarter direct-lending volume fell 28% year on year to $49.77 billion, according to PitchBook/LCD, widening the gap between capital raised and deals available.
- • Borrowers are migrating back to the broadly syndicated loan market: $16.39 billion of direct-lending loans were refinanced there in Q3, versus just $2.60 billion moving the other way.
- • Raymond James's Sunaina Sinha Haldea says the mismatch is cyclical rather than structural, and warns it could push managers to concede on spreads, leverage or documentation.
Summary
Private credit direct lenders are raising record sums even as deal activity slows, increasing pressure on managers to deploy capital into a shrinking pool of attractively priced opportunities, according to Reuters. Direct-lending funds raised $129.15 billion in the first nine months of 2026, up 35% from a year earlier and the highest nine-month total in Preqin data dating to 2016. Over the same period, estimated third-quarter lending volume fell 28% year on year to $49.77 billion, per PitchBook/LCD.
Sunaina Sinha Haldea, global head of private capital advisory at Raymond James, said the fundraising-deployment mismatch reflects a cyclical shortage of attractively priced deals, compounded by competition from the syndicated market, rather than a structural shortage of borrowers. She warned that abundant capital and scarce deals could push managers to concede on spreads, leverage or documentation, and described the real test of discipline as whether managers are willing to leave money undeployed.
Private credit gained share in recent years because borrowers valued the greater certainty and flexibility of direct lending, particularly when public leveraged-finance markets were volatile. In 2022 and 2023, more loans migrated from the broadly syndicated market into direct lending than moved the other way, PitchBook/LCD data showed. That balance has now shifted. In the third quarter, $16.39 billion of direct-lending loans were refinanced in the broadly syndicated market, compared with $2.60 billion of syndicated loans moving into direct lending.
Tarek Omar, chief investment officer of Royce Stone Capital, said borrowers with access to both markets would naturally gravitate toward cheaper financing once fees and refinancing costs were considered. As those borrowers repay, he noted, companies with fewer alternatives become a greater share of the remaining loans. Reuters noted this does not necessarily mean the remaining borrowers are weaker credits, since smaller companies may stay with direct lenders because syndicated financing does not suit their funding needs.
Sunaina Sinha Haldea, global head of private capital advisory at Raymond James, said the fundraising-deployment mismatch reflects a cyclical shortage of attractively priced deals, compounded by competition from the syndicated market, rather than a structural shortage of borrowers. She warned that abundant capital and scarce deals could push managers to concede on spreads, leverage or documentation, and described the real test of discipline as whether managers are willing to leave money undeployed.
Private credit gained share in recent years because borrowers valued the greater certainty and flexibility of direct lending, particularly when public leveraged-finance markets were volatile. In 2022 and 2023, more loans migrated from the broadly syndicated market into direct lending than moved the other way, PitchBook/LCD data showed. That balance has now shifted. In the third quarter, $16.39 billion of direct-lending loans were refinanced in the broadly syndicated market, compared with $2.60 billion of syndicated loans moving into direct lending.
Tarek Omar, chief investment officer of Royce Stone Capital, said borrowers with access to both markets would naturally gravitate toward cheaper financing once fees and refinancing costs were considered. As those borrowers repay, he noted, companies with fewer alternatives become a greater share of the remaining loans. Reuters noted this does not necessarily mean the remaining borrowers are weaker credits, since smaller companies may stay with direct lenders because syndicated financing does not suit their funding needs.
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