Natalia Lojevsky, Managing Director and Head of Wealth Solutions for CIFC, and Homyar Choksi, Direct Lending Deputy Chief Investment Officer, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss opportunities in lower middle market direct lending and the importance of disciplined underwriting and due diligence.
With more than $47 billion in assets under management, CIFC is a credit-first specialist manager with experience across both public and private credit. Lojevsky highlights that CIFC is one of the largest CLO managers in the U.S. while also lending directly to lower middle market companies, giving the firm a broad perspective across credit markets.
Choksi explains that direct lending as an asset class has performed well, delivering strong floating-rate income, lower volatility than public markets, low defaults and losses, and senior-secured structures. However, he emphasizes that the opportunity is more nuanced, with significant dispersion between the upper and lower middle markets. In the upper middle market, an influx of capital has intensified competition, contributing to lower pricing, higher leverage, looser documentation, and less rigorous underwriting standards. However, Choksi sees a more compelling opportunity in the lower middle market, where competition is less intense and lending remains more relationship-driven. He points to better pricing, lower leverage, simpler capital structures, and direct access to borrowers and sponsors as key advantages that can ultimately support stronger risk-adjusted returns.
Choksi also emphasizes that rigorous, repeatable underwriting is critical, particularly when competition intensifies. Lojevsky adds that advisors should “do the education before you do the allocation,” encouraging them to distinguish between managers, market segments, and structures while asking harder questions about underwriting, covenants, and downside protection rather than focusing solely on yield.
Resources: