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Timely Perspectives, Unconventional Thinking 

We’re excited to share timely market insights, thoughtful perspectives and expert commentary as part of our commitment to providing modern investment solutions to modern challenges.

Blog hero image

BLOGThe Bird's Eye View

Timely Perspectives, Unconventional Thinking 

We’re excited to share timely market insights, thoughtful perspectives and expert commentary as part of our commitment to providing modern investment solutions to modern challenges.

Alternatives

MMDL Spreads Widen Amid Slower Volume

Michelle Handy

Senior Managing Director and Chief Investment Officer of Direct Lending, Napier Park Global Capital

Activity in the middle market direct lending (MMDL) space during the first quarter was reminiscent of second quarter 2025, only with artificial intelligence and the war with Iran replacing tariffs as the primary headwinds to issuance.

After a record 2025, first quarter new issuance of $61 billion represented a 14% year-over-year decline. While dividend recapitalizations and refinancings were markedly lower during the quarter across deal sizes, financing to support M&A rose to its highest share of overall deal count since fourth quarter 2023. While volume in the lower middle market also slowed, its share of overall M&A activity by deal count fell to its lowest level since third quarter 2024.1

Many of 2025’s borrower-friendly trends showed signs of improvement in first quarter 2026. New-issue spreads widened across all deal sizes, with spreads for larger deals moving the most. Though spreads for lower middle market deals—borrowers whose earnings before interest, taxes, depreciation and appreciation are in the $5–25 million range—widened by only two basis points, we believe sustained widening in the large cap market may likely trickle down into smaller markets over time. Meanwhile, spread per turn of leverage among lower middle market loans ended the quarter at its widest level since August 2024 and maintained an attractive premium to larger deals.2

 

Many of 2025’s borrower-friendly trends showed signs of improvement in first quarter 2026.

We continue to believe that direct lending in the lower middle market can provide lenders and their investors an attractive combination of yield, leverage and structure.

1, 2 Source: KBRA DLD Research; data as of April 10, 2026.

The information contained in this material is provided by First Eagle Investment Management, LLC (“FEIM”) and its global subsidiaries (collectively, “First Eagle”). FEIM is an investment adviser registered with the US Securities and Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training.

This material is for informational purposes only and reflects prevailing conditions and the judgment of the author(s) as of the date of publication, all of which are subject to change. This material should not be relied upon as investment advice; it does not constitute a recommendation to buy or sell a security or other investment; and it is not intended to predict or depict the performance of any investment. This material is not being provided in a fiduciary capacity and is not intended to recommend any investment policy or investment strategy or consider the specific objectives or circumstances of any investor. We consider the information in this material to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of appropriateness for investment.

Prospective investors should inform themselves and consult with an investment, tax or legal professional as to any applicable legal requirements, taxation and exchange control regulations in the countries of their citizenship, residence or domicile that may be relevant prior to investing.

THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO SO.

All investments involve the risk of loss of principal.

Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur.

Alternative Investment Risks

Alternative investments can be speculative and are not suitable for all investors. Investing in alternative investments is only intended for experienced and sophisticated investors who are willing and able to bear the high economic risks associated with such an investment. Investors should carefully review and consider potential risks before investing. Certain of these risks include:

  • Loss of all or a substantial portion of the investment;
  • Lack of liquidity in that there may be no secondary market or interest in the strategy and none is expected to develop;
  • Volatility of returns;
  • Interest rate risk;
  • Restrictions on transferring interests in a private investment strategy;
  • Potential lack of diversification and resulting higher risk due to concentration within one or more sectors, industries, countries or regions;
  • Absence of information regarding valuations and pricing;
  • Complex tax structures and delays in tax reporting;
  • Less regulation and higher fees than mutual funds;
  • Use of leverage, which magnifies the potential for gain or loss on amounts invested and is generally considered a speculative investment technique and increases the risks associated with investing in the strategy;
  • Carried interest, which may cause the strategy to make more speculative, higher risk investments than would be the case in absence of such arrangements; and
  • Below investment grade loans, which may default and adversely affect returns.

Direct lending refers to a loan agreement negotiated between a borrower and single or small group of nonbank lenders. Direct lending can also be referred to as “private credit” or “private lending.”

The information presented does not reflect the performance of any fund, strategy or account managed or serviced by First Eagle, and there is no guarantee that investors will experience the type of performance reflected. There is no guarantee that any market forecast set forth in this material will be realized. There is no guarantee that any historical trend referenced herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. The mention of specific securities is not a recommendation or solicitation to buy, sell or hold any particular security and should not be relied upon as investment advice.

Availability of the products or services described may be restricted by law in certain jurisdictions. This material may not be distributed, published or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.

United Kingdom

Napier Park Global Capital Ltd is authorised and regulated by the Financial Conduct Authority (FRN: 541427) in the United Kingdom.

Middle East

This material is for information purposes only and has not been, and will not be, registered with or reviewed or approved by any regulator located in the Middle East. It does not constitute or form part of any marketing initiative, any offer to issue or sell, or any solicitation of any offer to subscribe to or purchase, any products, strategies or other services, nor shall it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract resulting therefrom. In the event that the recipient of this material wishes to receive further information regarding any products, strategies or other services, it shall specifically request the same in writing from an authorized financial adviser.

Canada

Pursuant to the international adviser registration exemption in National Instrument 31-103, First Eagle Investment Management, LLC. is informing you that: (i) First Eagle Investment Management, LLC. is not registered in Canada and is advising you in reliance upon an exemption from the adviser registration under National Instrument 31-103;  (ii) First Eagle Investment Management, LLC’s jurisdiction of residence is New York, USA; (iii) there may be difficulty enforcing legal rights against First Eagle Investment Management, LLC. because it is a resident outside of Canada and all or substantially all of its assets may be situated outside of Canada.

FEF Distributors, LLC (“FEFD”) (SIPC), a limited purpose broker-dealer, distributes certain First Eagle products. FEFD does not provide services to any investor but rather provides services to its First Eagle affiliates. As such, when FEFD presents a fund, strategy or other product to a prospective investor, FEFD and its representatives do not determine whether an investment in the fund, strategy or other product is in the best interests of, or is otherwise beneficial or suitable for, the investor. No statement by FEFD should be construed as a recommendation. Investors should exercise their own judgment and/or consult with a financial professional to determine whether it is advisable for the investor to invest in any First Eagle fund, strategy or product.

First Eagle Investments is the brand name for First Eagle Investment Management, LLC and its subsidiary investment advisers.

First Eagle Alternative Credit and Napier Park are brand names for the two subsidiary investment advisers engaged in the alternative credit business.

© 2026 First Eagle Investment Management, LLC. All rights reserved.

    Real Assets

    Housing Desirability Remains Durable

    Rajesh Agarwal

    Senior Managing Director, Head of US Real Estate and Consumer Debt Strategies, Napier Park Global Capital

    After falling steadily for most of the past 12 months, mortgage rates rebounded with the outbreak of the Iran war, sending the spring homebuying season off to a sluggish start. Though it slipped below 6% toward the end of February, the rate on 30-year fixed-rate mortgages ended the quarter at 6.47%, and this uptick combined with economic uncertainty appears to have weighed on housing market activity thus far in 2026.1

    Despite the short-term ebb and flow of the housing market, we believe that secular tailwinds—such as undersupply of housing in the US and the ongoing need for capital to refurbish existing homes and to develop lots for new homes—remain intact. Housing market dynamics combined with the retreat of traditional banks from construction lending, in our view, have created a supportive backdrop for nonbank providers of capital to the real estate industry. This includes capital to finance residential transitional loans (RTLs)—short-duration, value-add renovation loans—and builder financing transactions—off-balance-sheet financing provided to homebuilders for the acquisition and development of entitled and permitted land.

     

    In our view, housing market dynamics have created a supportive backdrop for nonbank providers of capital to the real estate industry.

    Notably, RTLs are backed by hard assets whose values are transparent and subject to frequent validation through the sale of similar properties, limiting the potential for an abrupt markdown by lenders. We see significant opportunity to lend capital to experienced developers that can renovate homes within existing communities with desirable characteristics like top school districts, walkability and proximity to jobs, with a focus on markets that exhibit stronger-than-average household incomes, population growth and housing supply constraints relative to the broader US—attributes that, in our view, support more resilient demand and home values. We believe this reinforces the importance of distinguishing between the national “housing market” and a more localized “market of homes.”

    1 Source: Freddie Mac; data as of March 31, 2026.

    The information contained in this material is provided by First Eagle Investment Management, LLC (“FEIM”) and its global subsidiaries (collectively, “First Eagle”). FEIM is an investment adviser registered with the US Securities and Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training.

    This material is for informational purposes only and reflects prevailing conditions and the judgment of the author(s) as of the date of publication, all of which are subject to change. This material should not be relied upon as investment advice; it does not constitute a recommendation to buy or sell a security or other investment; and it is not intended to predict or depict the performance of any investment. This material is not being provided in a fiduciary capacity and is not intended to recommend any investment policy or investment strategy or consider the specific objectives or circumstances of any investor. We consider the information in this material to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of appropriateness for investment.

    Prospective investors should inform themselves and consult with an investment, tax or legal professional as to any applicable legal requirements, taxation and exchange control regulations in the countries of their citizenship, residence or domicile that may be relevant prior to investing.

    THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO SO.

    All investments involve the risk of loss of principal.

    Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur.

    Alternative investments can be speculative and are not suitable for all investors. Investing in alternative investments is only intended for experienced and sophisticated investors who are willing and able to bear the high economic risks associated with such an investment. Investors should carefully review and consider potential risks before investing. Certain of these risks include:

    • Loss of all or a substantial portion of the investment;
    • Lack of liquidity in that there may be no secondary market or interest in the strategy and none is expected to develop;
    • Volatility of returns;
    • Interest rate risk;
    • Restrictions on transferring interests in a private investment strategy;
    • Potential lack of diversification and resulting higher risk due to concentration within one or more sectors, industries, countries or regions;
    • Absence of information regarding valuations and pricing;
    • Complex tax structures and delays in tax reporting;
    • Less regulation and higher fees than mutual funds;
    • Use of leverage, which magnifies the potential for gain or loss on amounts invested and is generally considered a speculative investment technique and increases the risks associated with investing in the strategy;
    • Carried interest, which may cause the strategy to make more speculative, higher risk investments than would be the case in absence of such arrangements; and
    • Below-investment-grade loans, which may default and adversely affect returns.

    Residential transitional loans (RTLs) are short-term loans to real estate developers for the purpose of renovating a residential property. The loans are secured by the property being renovated.

    Builder financing is off-balance sheet financing to public homebuilders to manage land inventory for new home development.

    The information presented does not reflect the performance of any fund, strategy or account managed or serviced by First Eagle, and there is no guarantee that investors will experience the type of performance reflected. There is no guarantee that any market forecast set forth in this material will be realized. There is no guarantee that any historical trend referenced herein will be repeated in the future, and there is no way to predict precisely when such a trend will begin. The mention of specific securities is not a recommendation or solicitation to buy, sell or hold any particular security and should not be relied upon as investment advice.

    Availability of the products or services described may be restricted by law in certain jurisdictions. This material may not be distributed, published or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.

    United Kingdom

    Napier Park Global Capital Ltd is authorised and regulated by the Financial Conduct Authority (FRN: 541427) in the United Kingdom.

    Middle East

    This material is for information purposes only and has not been, and will not be, registered with or reviewed or approved by any regulator located in the Middle East. It does not constitute or form part of any marketing initiative, any offer to issue or sell, or any solicitation of any offer to subscribe to or purchase, any products, strategies or other services, nor shall it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract resulting therefrom. In the event that the recipient of this material wishes to receive further information regarding any products, strategies or other services, it shall specifically request the same in writing from an authorized financial adviser.

    Canada

    Pursuant to the international adviser registration exemption in National Instrument 31-103, First Eagle Investment Management, LLC. is informing you that: (i) First Eagle Investment Management, LLC. is not registered in Canada and is advising you in reliance upon an exemption from the adviser registration under National Instrument 31-103;  (ii) First Eagle Investment Management, LLC’s jurisdiction of residence is New York, USA; (iii) there may be difficulty enforcing legal rights against First Eagle Investment Management, LLC. because it is a resident outside of Canada and all or substantially all of its assets may be situated outside of Canada.

    FEF Distributors, LLC (“FEFD”) (SIPC), a limited purpose broker-dealer, distributes certain First Eagle products. FEFD does not provide services to any investor but rather provides services to its First Eagle affiliates. As such, when FEFD presents a fund, strategy or other product to a prospective investor, FEFD and its representatives do not determine whether an investment in the fund, strategy or other product is in the best interests of, or is otherwise beneficial or suitable for, the investor. No statement by FEFD should be construed as a recommendation. Investors should exercise their own judgment and/or consult with a financial professional to determine whether it is advisable for the investor to invest in any First Eagle fund, strategy or product.

    First Eagle Investments is the brand name for First Eagle Investment Management, LLC and its subsidiary investment advisers.

    First Eagle Alternative Credit and Napier Park are brand names for the two subsidiary investment advisers engaged in the alternative credit business.

    © 2026 First Eagle Investment Management, LLC. All rights reserved.

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