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Principal Alternative Credit Direct Lending

Pursue the potential of direct lending in your portfolio

The lower middle market presents a distinct investment opportunity—offering enhanced yield and return potential with lower volatility, while providing important diversification benefits.

Benefit from our approach to direct lending

Our team, process, and resources allow us to focus on less competitive aspects of the market, including lower middle market and non-sponsored opportunities. Our flexible solutions offered to borrowers and sponsors provide us a competitive advantage to originate loans that other lenders cannot address.

Targeting lower and core middle market: Borrower size of $5-$50 million EBITDA can potentially provide higher expected return relative to risk and better structure than the upper middle market. Alignment of interest: Principal invests alongside our investors in every deal including strategic co-investment in funds. Diverse origination capabilities: Dedicated regional coverage of more than 350 select sponsors plus non-sponsored loan origination direct with borrowers, through advisors and the Principal client network.
ESG integration: We engage borrowers to assess risks and opportunities, assigning an ESG score for every loan. Intentional portfolio construction: Our team originates loans in targeted industries and help avoid those prone to higher defaults.

The direct lending opportunity for investors

Enhanced yield and return potential

  • Historically generated higher yields than most other fixed income strategies1
  • Comparable returns to public equities and other alternative investments2
  • Has historically performed well in a high interest rate environment3

Resiliency and diversification

  • Lower and core middle market direct lending has historically exhibited favorable default and loss experience
  • Performance is often not well correlated with other types of assets or with the business cycle
  • Universe size helps create more diversified portfolios, by accessing opportunities unavailable to investors limited to public markets

Reduced volatility plus downside mitigation

  • Typically, less sensitive to public market price volatility
  • Emphasis on companies with low cyclicality and stable cash flow
  • Loans are at the top of the capital structure with collateral offering attractive downside mitigation
  • Robust covenants can restrict some activities and require companies to maintain specific leverage

Why should investors consider private credit in their fixed income portfolios?

Unlock the potential of your fixed income portfolio. Hear from Tim Warrick, Group Head of the Direct Lending team, as he explains why investors are turning to private credit and how it could enhance your investment strategy.

Explore our featured direct lending strategy

Featured

Private Credit Direct Lending

Focused on providing attractive risk-adjusted returns through lower and core middle market direct lending in the U.S.

Get to know our investor relations team

The Direct Lending team is comprised of seasoned lending professionals, many of whom have worked together for more than 20 years. We have extensive experience across originations, underwriting, and portfolio management, with significant credit investing experience across all major industries and through multiple credit cycles.

Principal Alternative Credit

Managing Director, Group Head
Tim Warrick, CFA
35 years of experience
Head of Underwriting
Matt Darrah
21 years of experience
Director, Head of Operations
Nick Pierce, CIPM
21 years of experience

1 As of June 30, 2025. Based on data since December 31, 2020. Sources: Bloomberg, LSEG LPC, Principal Global Investors. Yield to maturity compared to 10 Year UST, Bloomberg U.S. High Yield Index, S&P/LSTA U.S. Leveraged Loan 100 BB/B Index.

2 As of March 31, 2025. Sources: Bloomberg, Cliffwater Direct Lending Index, S&P 500 S&P/LSTA Leverage Loan Index, Bloomberg U.S. Aggregate Bond Index, Bloomberg U.S. Municipal Index, Bloomberg U.S. Corporate Bond Index, Bloomberg U.S. Corporate High Yield Index. References the historical returns since September 30, 2004.

3 As of March 31, 2025. Sources: Cliffwater Direct Lending Index, World Economic Forum. In the last three interest rate cycles the Cliffwater Direct Lending Index has remained positive.

Disclosure

Past performance does not guarantee future results.

Asset allocation and diversification do not ensure a profit or protect against a loss.

Investment criteria/guidelines are subject to change.

Investments in private debt, including leveraged loans, middle market loans, and mezzanine debt, second liens, are subject to various risk factors, including credit risk, liquidity risk and interest rate risk.

ESG integration is considered across all actively managed asset classes, with the approach determined by each investment group’s process. This information is specific to the strategies managed by the individuals providing this content and various investment teams across Principal may have differing views of this approach.

Fixed‐income investment options are subject to interest rate risk, and their value will decline as interest rates rise.

Principal Alternative Credit is an investment team within Principal Global Investors.