Shadow Banking Tops Lending Activity in Private Equity

Here are the most active lenders for U.S. buyouts and private-equity owned companies, according to PitchBook.

Illustration by II

Illustration by II

The rise of shadow banking is evident in lending to private equity deals.

The five most active lenders for U.S. buyouts last year were asset managers, according to financial data provider PitchBook. Barings, owned by Massachusetts Mutual Life Insurance Co., ranked No. 1, followed by Antares Capital, Madison Capital Funding, Ares Management Corp. and Twin Brook Capital Partners.

Institutional investors have been pouring capital into private debt funds, which increasingly have replaced banks as lenders in the middle market. Assets under management in the private debt industry are expected double to about $1.4 trillion within the next five years, according to Preqin.

“The phenomenal growth of private debt over the past decade can be traced back to the global financial crisis,” Preqin and SEI said in a report this month. The firms said that regulatory pressure after the 2008 crisis led “banks to curtail corporate lending and adopt a much more conservative approach to origination.”

As a result, private debt assets have since soared to almost $667 billion from $245 billion in 2008, according to Preqin. While fundraising slowed in the first nine months of last year, it has not “dropped precipitously” as investors’ reach for yield continues, according to the report.

The boom in private debt funds has yet to be tested in a downturn. While fund managers have been particularly active within private equity-related deals, banks haven’t disappeared as lenders in this area of financing.


Goldman Sachs Group, for example, ranked among the top ten lenders for U.S. buyouts based on the number of deals last year.

Beyond financing buyouts, asset managers were the most active in lending to private equity-owned companies in the U.S., according to PitchBook. The top five mix was similar to the firm’s rankings of lenders for U.S. buyouts, except it included one bank.

Barings ranked No. 1 last year based on the number of deals it did for private-equity owned companies, followed by Antares, Ares and Madison. Goldman was the fifth-most-active lender to private equity-owned companies, according to PitchBook.