Back to View all
Chart of the week

Direct lending volume grows amid increased LBO activity

Private credit has increasingly become the preferred source of financing for PE sponsors, with direct lending volume jumping 60% over last year’s level.

Subscribe to the Chart of the week newsletter
October 18, 2024 | 2 minute read

Direct lending volume by month

Column chart showing direct lending deal volume by month. A line shows the 3-month moving average which has trended higher this year. Direct lending deal volume of $231 billion through September 2024 represents a nearly 60% jump versus all of 2023, a sign that LBO/M&A activity has picked up in recent months.

Source: J.P. Morgan and KBRA Direct Lending Deals (DLD) as of September 2024.

  • The Federal Reserve’s September rate cut was well-telegraphed but still effective in helping open a spigot of deal activity across corporate and commercial real estate markets as participants embrace expectations for a soft landing.
  • Refinancing activity has been elevated as companies seek to lock in their debt at lower financing costs. Leveraged buyout (LBO) activity has also picked up amid increased merger and acquisition activity among private equity sponsors. LBO activity of approximately $80 billion year to date (YTD) is more than 2.5x that of the same period in 2023.1
  • Against this backdrop, private credit has shown to be the preferred source of financing for many sponsors. Direct lending volume of $230 billion YTD is up nearly 60% versus the full calendar year 2023, as the chart shows.1
  • PE sponsors and portfolio companies find private credit to be an increasingly attractive option to provide efficient, customized financing solutions while working with a single lender.
  • Investors are also attracted to private credit as an appealing opportunity for above-market yield and the potential for portfolio diversification.

  • J.P. Morgan and KBRA Direct Lending Deals (DLD) as of September 2024.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.

Print this page Email this page

Related Insights

Chart of the week

Bond performance has improved, but volatility remains

Large monthly swings in core fixed income continue to rattle investors, calling into question its traditional role as a portfolio ballast.

Chart of the week

Private credit is a small fraction of the U.S. credit market

In contrast to the headlines, the primary story in private credit is the change in market share, not the change in market size.

Chart of the week

U.S. middle market shows notably strong top-line growth

Private middle market firms continue to power the U.S. economy, driving higher revenue growth than that of small and large cap firms.

Search our site