Key Takeaways
- • According to McKinsey's 2026 Global Private Markets Report, average leveraged buyout deal size in direct lending rose 29% in 2025 to approximately $380 million, up from roughly $295 million in 2024 and $200 million in 2020.
- • Top 25 managers captured approximately 72% of closed-end private credit fundraising in 2025, while the seven largest platforms grew AUM at roughly 20% annually from 2022 through 2025.
- • Global new-issue direct loan median spreads compressed 172 basis points from the March 2023 peak of 716 bps to 544 bps at year-end 2025, per the Kroll StepStone Private Credit Benchmarks.
- • Covenant-lite deals reached 21% of direct lending transactions in 2025, up from 4% in 2023, with 91% of those deals involving companies with EBITDA above $50 million, according to Proskauer.
- • Lower and core middle market segments remain structurally less competitive for mega-funds, which the article argues preserves pricing and covenant protections for specialized lenders.
Summary
An ABF Journal analysis argues that the growth of mega-fund platforms is reshaping the competitive structure of private credit, creating what market participants call a "barbell." Large platforms managing hundreds of billions of dollars must deploy capital in increments that make small transactions impractical, pushing them toward deals that rival the broadly syndicated loan market in size.
According to McKinsey's 2026 Global Private Markets Report, average leveraged buyout deal size in direct lending rose 29% in 2025 to approximately $380 million. McKinsey also reported that roughly $37 billion of broadly syndicated loan volume refinanced into direct lending in 2025, while $34 billion moved in the opposite direction, a near-parity that marks a departure from prior years of largely one-directional flows. Closed-end direct lending fundraising fell 28% year over year in 2025.
Pricing has moved in borrowers' favor at the top of the market. Per the Kroll StepStone Private Credit Benchmarks, global new-issue direct loan median spreads fell from a 716 basis point peak in March 2023 to 596 bps at year-end 2024 and 544 bps at year-end 2025. Documentation has loosened in parallel: Proskauer's 15th Annual Private Credit Insights Report, based on more than 450 deals closed in 2025, found covenant-lite penetration at 21%, up from 4% in 2023, with 91% of covenant-lite deals involving EBITDA above $50 million.
The lower middle market presents a different picture. Lord Abbett identifies more than 200,000 U.S. businesses as potential direct lending candidates and segments them into lower middle market ($10 million to $25 million EBITDA), core middle market ($25 million to $100 million), and upper middle market ($100 million to $300 million) bands. Commitment sizes required by a $15 billion-plus fund targeting 30 to 40 positions make these smaller credits unsuitable for mega-fund deployment, and the article contends that full covenant packages remain the norm in this segment.
Capital concentration is also evident in individual fund closes. Ares Capital Europe VI closed at €17.1 billion in LP commitments, which Ares describes as the largest institutional direct lending fund raised on an LP equity basis, a 53% increase over its €11.1 billion predecessor; total available capital for the Ares European Direct Lending strategy reached approximately €30 billion including leverage, according to Ares' January 2025 press release. Oaktree Capital Management closed Opportunities Fund XII at approximately $16 billion, the largest distressed debt fund raised, per PitchBook data.
According to McKinsey's 2026 Global Private Markets Report, average leveraged buyout deal size in direct lending rose 29% in 2025 to approximately $380 million. McKinsey also reported that roughly $37 billion of broadly syndicated loan volume refinanced into direct lending in 2025, while $34 billion moved in the opposite direction, a near-parity that marks a departure from prior years of largely one-directional flows. Closed-end direct lending fundraising fell 28% year over year in 2025.
Pricing has moved in borrowers' favor at the top of the market. Per the Kroll StepStone Private Credit Benchmarks, global new-issue direct loan median spreads fell from a 716 basis point peak in March 2023 to 596 bps at year-end 2024 and 544 bps at year-end 2025. Documentation has loosened in parallel: Proskauer's 15th Annual Private Credit Insights Report, based on more than 450 deals closed in 2025, found covenant-lite penetration at 21%, up from 4% in 2023, with 91% of covenant-lite deals involving EBITDA above $50 million.
The lower middle market presents a different picture. Lord Abbett identifies more than 200,000 U.S. businesses as potential direct lending candidates and segments them into lower middle market ($10 million to $25 million EBITDA), core middle market ($25 million to $100 million), and upper middle market ($100 million to $300 million) bands. Commitment sizes required by a $15 billion-plus fund targeting 30 to 40 positions make these smaller credits unsuitable for mega-fund deployment, and the article contends that full covenant packages remain the norm in this segment.
Capital concentration is also evident in individual fund closes. Ares Capital Europe VI closed at €17.1 billion in LP commitments, which Ares describes as the largest institutional direct lending fund raised on an LP equity basis, a 53% increase over its €11.1 billion predecessor; total available capital for the Ares European Direct Lending strategy reached approximately €30 billion including leverage, according to Ares' January 2025 press release. Oaktree Capital Management closed Opportunities Fund XII at approximately $16 billion, the largest distressed debt fund raised, per PitchBook data.
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