Direct lenders are operating amid another period of macroeconomic uncertainty, but Orla Walsh and Stuart Mathieson at Barings are not proposing a change in strategy. At SuperReturn International, they discussed why consistency, portfolio visibility and active asset management matter more than attempting to predict every change in market conditions.
• Barings intends to maintain its focus on sponsor-backed, senior-secured lending to mid-market businesses.
• Repeat sponsors and borrowers support consistent deployment across market cycles.
• Investors are scrutinising diversification and post-origination asset management more closely.
• Timely cash flow and performance data are critical when a borrower deviates from the plan.
• Institutional investors are becoming more comfortable with evergreen and perpetual structures.
Consistency through a noisy market
Walsh had previously hoped that 2026 might bring less macroeconomic noise. That has not necessarily happened. Her response is to focus on what a lender can control: underwriting discipline, portfolio monitoring and the timely flow of information from borrowers.
We are not fair-weather investors
Stuart Mathieson, Head of European Private Finance, Barings
Mathieson sees the present environment as a test of experienced credit underwriting. Across more than 120 assets, he says Barings is seeing earnings growth, cash-flow growth and strong interest coverage.
The data, in his view, provides evidence that the strategy is behaving as intended through a more demanding period.
Repeat relationships support consistent deployment
A significant proportion of Barings’ lending activity involves companies and sponsors already known to the platform.
Approximately half of its financing supports existing borrowers, while the other half relates to new activity. Mathieson says 75% of those who borrowed from Barings in the previous year were existing relationships, while 25% were new.
That balance allows the lender to build on established knowledge without becoming dependent on a closed group of borrowers.
Walsh describes Barings as a permanent financing partner, supported by consistency in its capital base, lending capacity and execution.
Origination is only half the job
Investors increasingly want portfolios diversified across sectors, geographies and a sufficiently broad number of assets. But constructing the portfolio is only the beginning.
Yes, you can originate, but then are you a good asset manager?
Stuart Mathieson, Head of European Private Finance, Barings
The critical test comes when an investment deviates from plan. Does the lender identify the change quickly? Is the correct information reaching decision-makers? Does the organisation have the expertise to respond?
Walsh says Barings has focused on improving the speed and quality of information moving through the organisation, including borrower cash flows and profit-and-loss data.
The goal is to understand how each company is performing in close to real time, particularly when the wider environment is changing.
Technology supports the monitoring process
Barings uses technology to aggregate, check and distribute portfolio information. The firm is also testing newer tools and AI-enabled services. Walsh describes much of that process as trial and error. Some tools are useful; others are less relevant.
The objective is not to pursue technology for its own sake, but to obtain cleaner and faster information. Human analysis remains the primary filter. Technology supports a large team of analysts rather than replacing their judgment.
Evergreen structures gain acceptance
Institutional investors are becoming more comfortable with evergreen and perpetual fund structures.
Mathieson describes these as flexible institutional vehicles that allow investors to determine their own investment period rather than being tied to the fixed three- or four-year investment period associated with a traditional closed-ended fund.
The underlying loans may still run off similarly to assets in a closed-ended structure, while the investor gains greater control over how long their capital remains committed.
Credit secondaries provide another liquidity route
The expansion of credit secondaries is creating additional liquidity options. Significant capital has been raised for dedicated secondary and portfolio purchases, and Barings receives approaches from firms interested in purchasing assets from its portfolios.
However, Walsh says many existing LPs have recently preferred to remain invested rather than seek liquidity. She views that as a positive indication of their confidence in the underlying portfolios.
A strategy designed for every environment
Walsh and Mathieson do not expect a significant change in investment strategy. Barings intends to continue focusing on sponsor-backed, first-lien, performing senior-secured loans to mid-market companies.
The aim is not to make a short-term call about one quarter’s conditions. It is to execute the same disciplined approach repeatedly, building diversified portfolios and managing them consistently through different market environments.