Milken had the work of W. Braddock Hickman (NBER staff, Cleveland Fed head) to lead him* but right now I don't know of any academic works on the peer-to-peer or 'direct' lending stuff during periods of economic stress.
From Barron's Penta:
How to Smartly Invest in Shadow Banking
Dodd-Frank and Basel III financial regulations have inadvertently created a massive investment opportunity. With U.S. banks facing ever stringent capital requirements, financing for small and medium size businesses across the country has dried up. Enter shadow banking. Direct-lending fund managers are stepping into the breach and offering floating rate loans to small and medium-sized U.S. businesses. A portfolio of such direct-lending vehicles can produce juicy returns, net of fees, of between 6% and 14%, according to Tampa, Florida-based financial advisory Bayshore Capital Advisors. That’s hard to beat in a low-yield environment.*And then there was Edward Altman to mislead.
“This is easy for most clients to understand because they see this [search for alternative financing] in their own business,” says Jonathan Bergman, managing director of New York-based TAG Associates, a multi-family office with $8 billion in assets under management. Bergman says a client with $10 million in assets, TAG’s minimum, who has a balanced risk tolerance, could consider allocating 5% of their portfolio to this direct lending strategy.
According to a Goldman Sachs estimate, the traditional banking sector will, due to regulatory changes, cede roughly $1.3 trillion of commercial, consumer and real asset loans to alternative lenders over the coming years. “With more red tape, higher capital requirements, and less leverage, banks have abandoned some lending activities which are no longer profitable,” write the folks at Bayshore Capital Advisors.
Spotting the opportunity in that void, large fund managers like Apollo, TCW and Cerberus have already launched billion dollar direct-lending funds. But there is still plenty of demand and room for profit. There are roughly 200,000 middle-market businesses with revenues between $10 million and $1 billion starved for funding, and, since 2008, alternative asset managers have raised $450 billion to satisfy their financing requirements and take advantage of this massive private-debt opportunity. The market should expand with continued economic growth, claims alternatives industry tracker Preqin, with the heart of America’s small to medium sized family businesses fueled “via private financing options.”
Private bankers have taken note and are shifting their focus back to the U.S. Citi Private Bank, for example, previously raised over $300 million from high-net worth clients for a European direct lending fund, but is now turning its attention to North America, says Daniel O’Donnell, Citi Private Bank’s head of private equity and real estate. As a general rule, there is a 1.5% to 2% return premium for direct lending in Europe over the U.S., O’Donnell says, largely because the market in Europe is tighter. Alternative lending in Europe is 20% of all leveraged loan activity, versus 85% in the U.S., but the greater market size here offers more cover, liquidity and openings. O’Donnell won’t show his cards but says he “sees opportunity in the U.S. shadow banking markets” and is “focused on niche direct-lending opportunities and businesses.”...MORE
After Altman left academia he went to Morgan Stanley and found an historical 1% default rate.
Of course is was totally in error but MS marketing guys liked it.
And he's back at NYU and no one ever mentions the 1% thing.