(Bloomberg) -- Arcmont Asset Management Ltd. raised €10 billion ($10.9 billion) for its latest European direct-lending fund, the high end of its target range, as institutional investors show a growing preference for larger managers like the investment firm. 

It’s the fourth fund devoted to London-based Arcmont’s direct-lending strategy, according to a statement seen by Bloomberg News. The company, an affiliate of investment heavyweight Nuveen, has already committed about 55% of the capital, the statement said. 

The biggest private-credit players are attracting large sums for their direct-lending strategies in Europe. Ares Management Corp., for example, is closing in on a record European direct-lending fund with €20 billion of firepower including leverage, and Hayfin Capital Management is looking to raise more than €8 billion from institutional investors for its fifth fund targeting the region.  

Anthony Fobel, chief executive of Arcmont, said that there is a growing gap between a small number of large funds and a large number of small ones. “That gap is only going to grow and the reason is quite simple,” Fobel told Bloomberg News in an interview. “You have to raise the money, you have to invest the money, and you need to make sure your portfolios are robust. And all three of those factors play to the advantage of large players.”

The top five players in European private debt account for about 35% of all of the capital in the European private debt market, according to Fobel. “I wouldn’t be surprised in a few years time if that’s more like 50%.”

Read more: Private Credit Titans Are Grabbing More Than Half of New Deals

Direct-lending giants had a busy 2023, deploying capital into larger and larger deals even as banks grew more cautious about underwriting in an unstable market. Arcmont was among the lenders that provided a record €4.5 billion loan to back the buyout of Adevinta ASA. It also supported the takeover of UK special-education services provider Outcomes First Group by TPG Inc. and Middle Eastern alternative asset manager Investcorp. 

Arcmont’s latest fund drew in investors from around the globe and included new ones, said Fobel. More investors are allocating to private credit, viewing it as a standalone asset class rather than as a private-equity or fixed-income offshoot. “Most institutions now accept private debt is a standalone asset class and they need a dedicated allocation to it.”

Increased Dealmaking

Activity is picking up in mergers and acquisitions as buyout funds to look put their pent-up capital to work. Direct lenders are vying with banks to finance a potential buyout of DocuSign Inc. with a debt package totaling as much as $8 billion.

However, unlike the U.S., the European leveraged-loan markets remain relatively weak — particularly for large debt-raises, Fobel said. While European leveraged-loan prices have climbed to a more than year-and-a-half high, according to Morningstar, that in part reflects a dearth of supply. 

Still, a number of managers have begun pre-marketing new collateralized loan obligation deals to bring to the European market, according to previous reports by Bloomberg News.

“We are not predicting that the leveraged loan or high yield markets are going to come roaring back in Europe,” Fobel said. “If the CLO appetite is constrained, that’s going to constrain the appetites for the banks and constrain their confidence in underwriting big loans.”

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