Smaller and more niche private credit funds are capitalising on the challenges facing larger players in the market, according to Jay Bala, chief executive of AIP Asset Management.
The impact of cash drag amid record levels of dry powder at larger firms is creating opportunities for smaller funds, he told Alternative Credit Investor.
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“Larger private credit funds face challenges due to having significant dry powder, which can cause cash drag and lower returns,” he said. “They also need to make larger investments, limiting their range of opportunities.
“In contrast, smaller funds are more agile, able to invest in a wider variety of smaller deals, and they have outperformed larger funds over the past decade.”
Read more: Debt funds increase market share against banks across Europe
He said that in many ways, the “Davids currently have the advantage over the Goliaths” in that they “have the ability to deploy capital more flexibly and diversify across more opportunities, making them better positioned than their larger counterparts”.
As of January this year, the top 20 global private credit fund managers collectively held $138.1bn (£101bn) in uncommitted capital, according to S&P Global Market Intelligence data.
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