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Principal Alternative Credit Direct Lending

Private credit strategy

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

Strategy differentiators

Exposure to lower and core middle markets, with a focus on achieving 90%+ in private credit

Access to diverse sources of origination on first lien senior secured loans across sponsored and non-sponsored opportunities

Disciplined credit investment process seeks to reduce downside risk while focusing on capital preservation

Managed by a dedicated and experienced team of direct lending specialists with strong client alignment and backing from Principal Financial Group

Complement a core equity and fixed income portfolio with private credit

Generate a healthier income

Over the past decade, private credit has generated a higher yield than many other asset classes, including averaging over 2% annual incremental yield compared to public broadly syndicated loans1

Resilience

Private credit has historically been resilient in a high-interest rate environment

Add diversification

Private credit is less correlated to traditional asset classes and may provide a diversifying source of return driven by current income through exposure to industries benefiting from positive secular trends with low cyclicality and stable cash flow

Benefits of investing in the lower and core middle market

The U.S. middle market is a powerful economic engine with nearly 200,000 diverse businesses across industries, one-third of private sector GDP contribution, and employment of 48M Americans.2

Potential for enhanced yields: Middle market direct lending has generated higher yields than most other fixed income strategies.3 Stronger lender protections: More conservative loan structures; Tighter financial covenants; Greater control over loan terms. Lower leverage levels: Typically, lower debt-to-EBITDA multiples; More conservative capital structures; Potentially lower default risk.
Less competition: Fewer lenders operating in this space; Higher barriers to entry; More selective deal sourcing. Relationship-driven: Direct relationships with borrowers; Better information access and transparency; Opportunity for repeat business.

Our capabilities in direct lending4

Heritage of serving clients for over 50 years

  • Consistent credit culture results in conservative approach to risk/return
  • Producing independent internal credit ratings across private credit since 1965

Strong client alignment

  • Principal Life Insurance Company’s (PLIC) General Account has allocated $3Bn to private credit
  • PLIC will hold a portion of every loan invested in by the strategy
  • Consistent allocations across all available vehicles

Diverse sourcing for loan origination

  • Deals sourced from > 350 U.S. sponsors
  • Long-standing relationships provide access and intelligence
  • Non-sponsored deals sourced directly from companies, brokers, intermediaries, and the Elevate by Principal Platform

Disciplined credit investment process

  • Methodical underwriting approach with in-depth third-party diligence
  • Robust covenants and tight credit agreements
  • Detailed downside underwriting and modeling, with senior secured positions, result in predictable outcomes in all credit environments

Expansive capabilities

  • Dedicated direct lending team with origination, structuring, underwriting, portfolio management, legal, and compliance experts
  • Full capabilities to lead investments from start to finish
  • Seasoned credit team experienced across industry verticals and debt assets

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 30 June 2025. Source: LSEG. Comparison between Large Corp. (Syndicated) Term Loan Yields: (i.e., non-middle market) Syndicated or direct/clubbed deals that have either borrower revenues or total loan package US$500m or greater. Direct Lending MM 1st Lien Term Loan Yields: Non-syndicated facilities, issuers with revenues of US$500M and below and a total loan package of US$500M and below.

2 Source: National Center for the Middle Market Year End 2024 Middle Market Indicator.

3 As of 30 June 2025. Based on data since 31 December 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.

4 As of 30 June 2025. Source: Principal Global Investors. The $3B+ capital commitment from Principal is the run rate capital commitment that the Principal Life Insurance Company’s General Account is looking to invest in Private Credit with Principal Alternative Credit.

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.

Private credit involves an investment in non-publicly traded securities which are subject to illiquidity risk. Portfolios that invest in private credit may be leveraged and may engage in speculative investment practices that increase the risk of investment loss.

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

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