There's a lot of private-credit money chasing the biggest deals. This $7 billion manager is going after 'funkier stuff.'

"In recent years, managers like BlackRock, Millennium, Ares, D.E. Shaw, Blackstone, and others have raised massive funds, acquired long-standing private debt players, and launched new units to lend to companies and projects, with many focusing on infrastructure, both physical and digital. But that much competition for deals means lendees, not lenders, have their pick of a partner and can negotiate for more favorable terms, which has tamped down return expectations for the asset class."

"And yet, despite these emerging headwinds, alternative asset manager New Holland Capital is deciding to open its private credit strategy, called Special Opportunities, to new cash. The reason: "We're seeing no spread compression in deals we are looking at," said Andrew Parchman, a partner at the firm. While big-name direct lending strategies run by the industry's titans might be feeling pinched, "there's a lot less erosion" in the "funkier things" the firm's smaller strategy looks at, said Scott Radke, the firm's co-chief investment officer."

Global asset managers have poured hundreds of billions into private credit, concentrating competition in large direct-lending and infrastructure deals. Major firms raised funds, bought private-debt platforms, and launched lending units aimed at physical and digital infrastructure. Heavy competition gives borrowers leverage to demand more favorable terms, which compresses lender returns and dampens institutional appetite amid rising default concerns. New Holland Capital is opening its Special Opportunities private credit strategy to new capital and finds that smaller, less competitive "funkier" deals show little spread compression and continue to offer stronger returns for investors.

Read at Business Insider