Institutional investors are placing too much focus on mid-market corporate lending and are likely to see deteriorating future returns as a result, Willis Towers Watson (WLTW) has warned.

The investment consultancy highlighted how investors have more than trebled asset allocations in credit strategies over the last decade, with the majority focusing on direct lending.
This has created a squeezed portion of the market, putting downward pressure on returns and upward pressure on risk, with investors missing out on less competitive opportunities.
WLTW global head of credit and diversifying strategies, Chris Redmond, said smaller, niche strategies typically offered by specialist managers are "often the most compelling".
"Particularly when faced with higher valuations such as those we see in most credit markets today," he continued.
"Many investors are unwilling to be a first-mover into markets that have experienced historical performance issues - US residential mortgages are a great example.
"It's a sector that we believe has demonstrated improved fundamentals while delivering excellent performance, both on an absolute, and risk-adjusted basis."
This comes after research from data analysis firm Prequin found that private debt assets under management reached a record-breaking $667bn (£525bn) at the end of last year.
This represents a 13% increase from December 2016, while direct lending saw a noticeable increase of $47bn in assets under management over 2017 - an annual growth rate of 30%.
WLTW said there is a tendency for managers to focus on ideas that can be quickly raised, are scalable, and profitable to run, often attracting them towards very similar opportunities.
"In recent years meaningful investor capital has flowed into the private debt market, making it more challenging to find value today," Redmond continued.
"However, we feel there are compelling opportunities to be found if investors remain selective, with good value for risk taken for those investors willing to go the extra mile and unearth interesting opportunities."