PennantPark sees core middle-market lending opportunities heading into 2027
PFLT•PFLT•PFLT•PFLT•PennantPark's November 2026 analysis favors selective private credit strategies, highlighting core middle-market lending over upper middle-market lending as competition increases.
PennantPark's analysis favors core middle-market lending, citing heavy capital inflows into upper middle-market lending that have increased competition and contributed to higher borrower leverage, tighter spreads and weaker lender protections. It also cautions that allocations across large private credit managers may conceal overlapping loans, limiting diversification.
The analysis identifies government services and technology as opportunities tied to defense spending, and CLO BB-rated debt as a way to gain diversified corporate loan exposure with structural protections. It flags recession risk and says higher interest rates can pressure borrowers' debt servicing capacity even as they boost floating-rate loan income.
