Early in the year, direct lending was riding high. With record fundraising in 2019 and having reaped the benefits of years of market education, managers were deploying at a rapid pace. But then the pandemic struck and brought untold challenges.Managers had (and still have) much to contend with, including underperformance in portfolios and lack of investment opportunities as M&A dwindled. They hurried to find their footing after the first wave of the coronavirus and prepare for potential recurrences, all while juggling the need to deploy sensibly with taking advantage of dislocation, as well as continuing to tread – virtually – the fundraising trail.

Remarkably, most direct lenders have managed to escape the crisis fairly unscathed, and many expect Q4 to be their largest yet.

But direct lenders are not restricting themselves to the mid-market. A growing number of managers are targeting the large-cap space, such as Ares Management, HPS and Goldman Sachs PIA, with ever larger funds. Most recently, CVC decided also to go for size, with plans to supercharge its European direct lending arm.

The challenge for managers is to differentiate themselves in an increasingly competitive environment, where most funds are chasing the same, safer assets in COVID-19-proof industries. In that respect, those with the best track record are most likely to prevail in the fundraising battle.

In this edition, we explore how the tumult of 2020 is impacting fundraising in the direct lending space, how LPs feel about performance and behaviour in the sector, and how direct lenders are capitalising on opportunities between periods of instability. You will also find our regular features on direct lending deals and fundraising data and league tables.