VIDEO: The attraction of middle-market premiums

The middle-market’s roughly 100bps premium over broadly syndicated loans is widely seen as a risk premium, but that’s not the case, says Antares Capital COO Timothy Lyne.

This video is sponsored by Antares Capital

Many investors see the historical 100 basis-point premium over the broadly syndicated market that middle-market private debt offers and assume that is a risk premium. But what that really is, says Antares Capital COO Timothy Lyne, is an illiquidity premium. “Meaning, broadly syndicated loans are liquid, middle-market loans are not.”

Lyne adds that “if you look more recently, the premium has been even greater than 100bps”. What’s more, he says it appears that the market rebound from the lows of the early pandemic appears to be sustainable.

“We think GDP growth will be very strong in 2021, and many of the companies in our portfolio will benefit from that,” Lyne says in this video interview for Private Debt Investor. “We also believe that M&A volume will pick up significantly in 2021. So we are very positive about the future for private debt not only for 2021, but for the next four or five years.”