Upper middle market borrowers increasingly toggle between direct lending and syndicated loans, making a combined approach critical for consistent deployment and optimal returns.
Senior secured floating-rate loans to European upper middle market companies offer enhanced yield and stability compared to lower middle market exposure.
Regulatory changes and shifting borrower preferences are blurring the lines between direct lending and syndicated markets, creating opportunities for strategies that adapt across deal types.
Over the past two decades, private credit has evolved into a cornerstone of institutional portfolios, filling the gap left by traditional banks in corporate lending. Within Europe, one segment stands out for its resilience and potential: the upper middle market—companies with €50 million or more in EBITDA. These businesses typically offer robust balance sheets, stable cash flows, and attractive risk-return profiles, making them a compelling focus for investors seeking consistent income, asset stability and diversification. Explore the full white paper here: “The case for the European upper middle market.”
Historically, private credit bifurcated into two channels: syndicated loans (bank-arranged and broadly distributed) and direct lending (originated by non-bank lenders). While syndicated loans provide liquidity and scale, direct lending offers a spread premium in exchange for illiquidity. Today, these distinctions are blurring. Upper middle market borrowers increasingly toggle between both financing options, driven by market conditions and pricing dynamics. For investors, this means flexibility is key.
Invesco believes that combining exposure to direct lending and syndicated loans within a single strategy delivers the best of both worlds:
This integrated approach ensures portfolios remain fully invested while capturing attractive spreads from high-quality European borrowers.
Regulatory changes post-Global Financial Crisis constrained bank lending, creating space for private credit to thrive. As dry powder in direct lending grew, larger companies—once the domain of syndicated markets—entered the direct lending space. Today, upper middle market borrowers evaluate both options, shifting based on market conditions and their specific financing needs. For example, when syndicated loan issuance weakens and spreads widen, direct lending activity surges; conversely, tighter loan markets attract borrowers back to syndicated deals.
Sources: PitchBook | LCD. Data through October 31, 2025. Analysis based on transactions covered by LCD News; share calculated based on deals where size information is disclosed.
Allocating to European private credit offers a compelling set of advantages for institutional investors seeking diversification and resilience in today’s market:
For investors seeking evergreen solutions, strategies focused on the upper middle market can offer consistent deployment without capital calls, access to high-quality borrowers, and floating-rate structures that help mitigate interest rate risk. This combination can deliver high income with stability, making it an attractive complement to traditional fixed income allocations.
To learn more, read the full white paper: “The case for the European upper middle market.”
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