In this Q&A, Barings’ Eric Lloyd discusses his team’s approach to navigating the risks and capitalizing on the opportunities across the global private credit markets.
Private credit, or middle market lending, has many different names. How does Barings define the asset class?
At the most basic level, we’re investing in and lending to companies that are too small to access the liquid capital markets but large enough that they need capital for growth. At Barings, we consider private credit to be a global asset class, and we have offices around the world to accommodate that. Of all the regions in which we invest, the U.S. middle market is the largest and most developed. In Europe, private credit is a somewhat newer phenomenon.
The size of the companies in this space can differ by region, depending on the manager. While some managers may consider the middle market as consisting of companies with $2–$10 million of earnings, others view middle market companies as those with up to $100 million of earnings, or even more in some cases. For us, a U.S. or European middle market company is one with $10–$50 million of earnings. In Asia, middle-market companies tend to be a little bit larger, as the capital markets in that region are less developed relative to Europe and the U.S.