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Direct lending: how senior is your debt?

Within private credit, direct lending offers a wide range of options for investors seeking the right balance of risk and reward for their particular needs

In this report, we propose a framework for analysing risk-adjusted returns for different direct lending strategies within private credit. We also discuss current market pricing and analyse whether investors are being fairly compensated for incremental loss factors such as leverage, subordination, and covenant light documentation.

We begin the discussion by looking at developments in the types of strategies widely acknowledged to make up direct lending as a subset of private credit.

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