Underserved Loan Market Attracts Investors

Chidem Kurdas

Garrison Capital and Goldman Sachs affiliate Liberty Harbor are among the loan managers targeting what many see as a persistent lack of credit availability to small-to-mid-sized companies.

Garrison says in a report: “We believe that there continues to be a scarcity of capital in the lower middle-market as many traditional lenders to these companies have exited the business due to regulatory restrictions or focused their attention on larger borrowers.”

Liberty Harbor made the same point that banks are less willing to provide loans to such companies due to new regulatory restrictions on their balance sheets. Investors apparently agree that this is an opportunity—Liberty Harbor raised more than $500 million in a series of private offerings of shares in a loan fund. The private sales were prior to the expected IPO of the fund.

In addition to the opportunities opened by capital scarcity, Garrison says middle-market loans have not been significantly affected by rising interest rates. Though risky in other ways, this market niche may be comparatively immune to the Federal Reserve tapering off its easy money policy.

Garrison was founded by two former Fortress Investment Group partners, Steven Stuart and Joseph Tansey. In the past two years its assets have gone from less than $2 billion to over $3 billion. The firm manages private equity, hedge funds and a NASDAQ-listed loan investment vehicle.

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One Response to “Underserved Loan Market Attracts Investors”

  1. Goldman Liberty Harbor Gets Premier Investor | HedgeFundSmarts Says:

    […] there is competition for investment opportunities as others have also raised capital to invest in the loan market, seen as a land of opportunity because new regulatory restrictions in effect clamped down on conventional bank loans to mid-sized […]

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