Jack Snyder
My name is Jack Snyder, Head of Wealth Distribution at Antares Capital. There's been no shortage of negative headlines around the private credit markets over the last few quarters. However, institutions continue to allocate heavily to the space. Since the shakeout, they've cited better deal terms and wider spreads, and they might be on to something. In this month's Antares Beyond the Basics I'm joined by Doug Cannaliato, our Co-Head of Originations. He's going to put some of the questions and concerns into context from a manager with over 30 years of experience in the direct lending space. Doug, thanks for joining us.
Doug Cannaliato
Institutions have been allocating to this asset class for decades, and that's actually pretty typical. Adoption starts with institutions before expanding out. This is an asset class that's been tested over and over again. At Antares, we've been investing in this market for nearly 30 years. We were first backed by an institutional investor. And since then we've invested through multiple cycles, including the global financial crisis and most recently, COVID. Our history alone reinforces the fact that this is very much a long standing, tested and resilient asset class.
The adoption curve for middle market direct lending has been sort of a pretty classic curve. It started with institutions, especially large, sophisticated allocators like insurance companies who are attracted to the income diversification and downside protection. And as the market's grown, what's changed is access. Today, wealth investors can also participate.
This markets very large. The US middle market is a multi-trillion-dollar part of the economy, and it includes thousands of sponsor owned companies. That scale creates a broad and consistent pipeline of opportunities for private credit investors.
One of the biggest drivers is a structural shift in the market. The number of public companies has declined sharply, roughly halving since the late 1990s. And at the same time, more scaled businesses are choosing to stay private. Today, 85 to 90% of companies with over $100 million of revenue are private, and as a result, the investable universe for private credit has expanded significantly, creating a really large opportunity set.
As it relates to differentiation, it really comes down to discipline, especially across cycles. For us, that means maintaining our underwriting discipline and not reaching for risk beyond our credit box. In periods like we've seen recently where there's lots of capital coming into the market, and less new M&A, there can be pressure to put money to work. And that's where some managers begin to stretch. We've taken a more measured approach, aligning our fundraising with our deployment and sticking to our credit box that's been informed over a 30-year period.
Why does this matter to wealth advisors? Well, it matters because wealth portfolios are under allocated to this asset class. For institutions, this has been a core allocation for years. So that gap is the opportunity. The wealth channel is still early but catching up as advisors deepen their understanding of private credit and begin to differentiate across BDCs.
So you asked me about the takeaway. Well, this market isn't new, it's not untested. But as the market grows and becomes more competitive, manager selection is really important.