This report explores the potential impact of escalating trade tensions, tariffs, market volatility, and a possible economic slowdown on investment fund debt-related transactions. While fund debt transactions are not immune to broader macroeconomic headwinds, recent events underscore the relative stability of private markets compared to their public and bank loan market counterparts. KBRA has so far observed little to no disruption of private lending and transaction activities. This relative resilience reflects the ample dry powder available in private markets, the significant structural protections including matched funding in most rated transactions, the lack of forced liquidation during public market gyrations, and the ability of investors and lenders to remain focused on longer-term considerations in their mostly bilateral relationships.
However, highly leveraged middle market (MM) sponsor-backed corporate borrowers are at the core of many fund debt transactions, and many of these…