LONDON, 11 December 2024 – Today Preqin, the global leader in alternative assets data, tools, and insights, published its Preqin Global Report 2025: Private Debt. The report shows that while private debt fundraising saw a substantial recovery after a slow Q1 2024, it was not enough to catch up the ground lost during those first three months of the year. This challenging fundraising environment for the asset class saw private debt investors adopt a more defensive approach as well as create a shift in the balance of power between fund managers and investors when it comes to fees.
Fundraising shows signs of recovery for private debt after difficult start to 2024
Full-year global private debt fundraising in 2024 is expected to be down compared to 2023 owing to a weak Q1 2024. Private debt fundraising reached $118bn by Q3 2024, with Preqin analysts believing a full-year figure will be below 2023’s $214bn. Instead, it is likely to be in line with the 10-year average annual fundraising number of $161bn.
Within the context of a weaker fundraising environment for the asset class, fee levels in 2024were impacted. The mean management fee for direct lending decreased by 0.26% year-on-year to1.42%. Preqin analystsperceive fee pressure may continue for direct lending until fundraising forecasts improve in 2026*. Other private debt strategies, such as mezzanine, distressed debt, and special situations, tend to have higher levels of fees, which is reflective of the active management required in those strategies. The median management fee for non-direct lending strategies was 2.00%, compared to 1.50% for direct lending, both unchanged from 2023.
Private debt investors adopt a more defensive approach
Looking at notable 2024 trends, there are three signs that private debt investors shifted towards a more defensive stance. Firstly, North America was the clear favorite for investors in 2024. 92% of surveyed private debt investors** rate the US as the developed market presenting the best opportunities. This trend is further backed up by fundraising data, with 72% of private debt capital raised globally attributed to North America-focused funds by Q3 2024, reaching $85bn. Then, at the strategy-level, direct lending saw strong investor sentiment and allocations in 2024, with fundraising hitting $93bn by Q3 2024. Finally, investors continue to allocate disproportionately to the largest private debt managers, as the share of fundraising for funds outside the top 50 fell from 19% in 2023 to 5%by Q3 2024.
RJ Joshua, Vice President, Head of Private Debt, Research Insights, at Preqin says, “We see a defensiveness, with investors allocating mostly to North America as the best-known geography; direct lending, as the simplest and best-known strategy; and disproportionately to the largest, best-known managers. Investors may remain positive on private debt in the long term, while appearing to be less adventurous overall than 12 months ago.”
Additional key findings from the Preqin Global Report 2025: Private Debt include:
Regional focus: In terms of geographic split, North America extended its lead in fundraising. The region captured 72% of funds raised in private debt up by Q3 2024, up from 64% in 2023. During this same period, Europe lost share by a similar amount. However, it is notable that Europe’s share is practically unchanged when looking at the number of funds closed, with 24% of the number of funds closed in Europe through Q3 2024. This trend suggests that investors are still spending time on allocating to Europe, just not in the size they are willing to in North America.
Role of fund manager experience: There are signs of caution from investors who appear less willing to allocate to new managers than in the past, as their average fund size declined for the third year running, falling to $78mn on average. By contrast, the average fund size for experienced managers is at a 10-year high, reaching $1.5bn. Preqin analysts expect this ‘incumbency advantage’ to persist and strengthen as the industry matures, favoring larger established players.
Investor survey: Investors remain committed to private debt, with 49% of investors saying they will increase their allocations to the asset class in the long term, contrasting with 9% saying they will reduce their allocation. Direct lending remains the most popular of the major strategies, as 54% of investors believing it presents the best opportunities within private debt.
#ENDS#
Preqin Global Reports
Preqin’s Global Reports provide exclusive analysis across all alternative asset classes. If you would like to receive a copy of any of the following reports, please get in touch: private equity, venture capital, private debt, hedge funds, real estate and infrastructure.
Notes to the editors
* According to Preqin’s Future of Alternatives 2029 report.
** Preqin investor survey conducted in November 2024, with 255 participants.
