Structural changes since the global financial crisis have expanded direct lending beyond smaller borrowers, with upper middle market transactions now representing a significant share of European deal activity.
Upper middle market borrowers typically benefit from diversified revenues and stronger fundamentals, while current market dynamics are narrowing the spread gap versus smaller, higher‑risk loans.
Combining direct lending with broadly syndicated loans can enhance diversification, support faster deployment, and deliver more consistent income in an evergreen structure.
European private credit is undergoing a significant transformation, creating new opportunities for investors seeking resilient income and efficient access to larger borrowers. Invesco’s private credit specialists examine how the upper middle market has evolved into a compelling segment of European direct lending, and how thoughtful portfolio construction can help investors navigate today’s shifting credit landscape. Read below for some of the key takeaways from the event, and watch the replay for the full conversations.
Originally shaped by bank retrenchment following the global financial crisis, the market has expanded significantly over the past 15 years. As private equity funds have grown and transaction sizes have increased, direct lending has moved beyond smaller businesses and into larger, upper middle market companies. More recently, volatility and uncertainty in liquid credit markets have further accelerated this shift, with upper middle market transactions now accounting for a sizeable proportion of European direct lending activity.
These companies typically have more diversified revenues, customer bases, and operational footprints, which can enhance resilience during periods of economic stress. Recent market dynamics have also improved the relative value of lending to larger businesses. While absolute yields remain attractive, the additional spread offered for lending to smaller, higher‑risk borrowers has narrowed, making upper middle market exposure increasingly compelling on a risk‑adjusted basis.
In the upper middle market, the distinction between direct lending and broadly syndicated loans is often more about liquidity than underlying credit quality. By combining these exposures, investors may be able to capture illiquidity premia while maintaining flexibility, improving diversification, and addressing deployment challenges. This hybrid approach can also support more disciplined capital allocation, allowing managers to remain selective rather than stretching for direct lending opportunities.
Traditional boundaries between banks and direct lenders are blurring, with hybrid origination and distribution models becoming more common. This evolution expands the investable universe, enabling broader diversification across sectors and geographies, particularly in a heterogeneous, multi‑jurisdictional market like Europe.
An evergreen, fully funded vehicle can help investors manage common challenges such as capital calls, pacing of deployment, and maintaining consistent income. By integrating liquid and private credit exposures within a single strategy, the approach aims to deliver a more efficient and forward‑looking way to access European upper middle market credit.
Watch the on‑demand webinar replay to hear the full discussion and learn more about Invesco’s approach to European upper middle market private credit.
Invesco Private credit is one of the global leaders in private credit investing with a dynamic platform built on experience, scale and agility.
We are excited to announce a new partnership designed to help investors realise the full return potential of the global economy by unlocking new opportunities in private markets.
The private credit market delivered strong returns in 2025. Can investors expect the same in 2026? Our experts discuss where they’re seeing potential for compelling risk-adjusted returns.
Discover how Collateralised Loan Obligations (CLOs) can offer portfolio diversification, active management, and access to resilient leveraged loans for professional investors.
