Private debt investors are increasingly turning to the healthcare sector, attracted by the potential for higher returns compared to traditional direct lending strategies.
Private debt investors are increasingly targeting the healthcare sector, attracted by the potential for higher returns compared to traditional direct lending strategies. According to bfinance, healthcare lending funds have net internal rate of return (IRR) targets that are over 300 basis points higher than those of conventional direct lending funds.
This growing interest has led to the emergence of new healthcare-focused lending funds, with larger private debt managers entering a space previously dominated by smaller specialists. However, the sector presents unique challenges, including companies with low or negative cash flows, a significant proportion of unsponsored transactions, and complex deal structures.
Investors considering this niche should be aware of these complexities and the need for specialized expertise to navigate the sector effectively.
