Private Credit Insights: The Collateral Crunch (and How to Avoid It)

Private Credit Insights: The Collateral Crunch (and How to Avoid It)

Time to read: Minutes
Key Takeaways

A sharp contraction in private equity liquidity, plus an oncoming maturity wall, could impact middle market lenders with large allocations to software, services and other low-collateral businesses.

Strategies with a higher-collateral focus, low reliance on PE sponsors, and the ability to access project finance and private placement deals will increasingly provide important diversification from the herd.

Despite the dismal office market and doom-laden headlines, select commercial mortgage lending strategies outperformed last year. This year has further upside potential.

In a land of middle market mega-funds, exposure to low-collateral, private-equity-driven investments could become an issue—yet this is readily addressable with diversification into a higher-collateral specialist fund. Plus: smart ways to play commercial mortgage lending now.


Past performance is no guarantee of future results. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. All security transactions involve substantial risk of loss. 

This market insight has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Fund holdings are fluid and are subject to daily change based on market conditions and other factors. 

Canada: Please be advised that Voya Investment Management Co. LLC is a non-Canadian company. We are not registered as a dealer or adviser under Canadian securities legislation. We operate in the Provinces of Nova Scotia, Ontario and Manitoba based on the international adviser registration exemption provided in National Instrument 31-103. As such, investors will have more limited rights and recourse than if the investment manager were registered under applicable Canadian securities laws. 

For financial professional use only. Not for inspection by, distribution to or quotation to the general public.