As the interest rate environment evolves, direct lending presents a compelling opportunity for investors. Here are some key characteristics that make direct lending an attractive option:

☀ Floating-Rate Loans: These loans are typically quoted as a spread above the Secured Overnight Financing Rate (SOFR), providing potential benefits in a rising rate environment.

☀ Short Term to Maturity: Direct lending loans usually mature between five and six years from issuance. The average life until principal repayment is often shorter, typically ranging from three to four years. This shorter maturity period contrasts with high yield bonds, which often have maturities exceeding seven years.

☀ Lower Volatility than Public Debt: Direct lending deals exhibit lower volatility compared to public debt because they are private, directly negotiated transactions that are not subject to the day-to-day trading activities and market sentiments that can cause fluctuations in publicly traded assets.

☀ Advantageous Terms for Skilled Managers: Managers may target middle-market companies with a median EBITDA high enough to ensure expertise and diversity but still below the threshold for accessing syndicated markets. This strategy provides loans with a similar risk profile to larger companies but with more favorable economic and structural terms.

La Hoja Capital Partners is here to provide access to this growing sector. If you are a financial/wealth advisor, please reach out to discuss how we can help you navigate this landscape.