Alternatives in 2019: Private Debt Fundraising Sees Strategy Shifts

by Naomi Feliz

  • 05 Feb 2019
  • PD

Private debt fundraising remained strong in 2018, marking the fourth consecutive year in which funds raised more than $100bn from investors. As shown in the chart below, 163 funds secured $110bn, and Preqin expects these figures to rise by up to 10% as more information becomes available.

Despite the headline figures, direct lending and distressed debt fundraising – traditionally the largest portions of the market – both saw declines in aggregate capital raised. Direct lending fundraising was significantly down from $68bn in 2017 to $45bn in 2018, while distressed debt fundraising fell from $33bn to $21bn over the same period. Mezzanine fundraising, meanwhile, surged from $12bn to $31bn, in part due to the closure of the $13bn GS Mezzanine Partners VII, the largest fund of the year.

Key private debt fundraising stats:

  • 2018 saw 163 private debt funds raise a combined $110bn, down from 189 funds which raised $129bn in 2017.
  • Direct lending fundraising was down from $68bn the previous year to $45bn in 2018, while distressed debt fundraising was down from $33bn to $21bn.
  • Mezzanine fundraising surged from $12bn in 2017 to $31bn, partly due to several large fund closures.
  • North America saw 91 funds secure $68bn, while 42 Europe-focused funds raised $36bn.
  • Over half (51%) of funds exceeded their targets in 2018, and the average time spent in market was 14 months – the lowest on record.
  • The largest fund closed in the year was GS Mezzanine Partners VII, which at $13bn became the largest private debt fund ever closed.
  • Dry powder kept rising through 2018 and stands at $280bn as at the end of December 2018.
  • Looking ahead, there are 395 private debt funds in market at the start of 2019, seeking a total of $168bn.

Preqin’s Tom Carr, Head of Private Debt, commented: “The healthy underlying conditions that helped drive private debt fundraising activity in recent years have continued in 2018. This is the fourth year in which funds raised more than $100bn, and while 2018 may not have reached 2017’s heights, it is still a remarkable achievement for a relatively small asset class. The closure of the largest private debt fund ever (matched only by its predecessor 10 years ago) a particular sign of strength for the sector. However, it is curious to see direct lending fundraising fall so steeply. It may indicate that investors’ concerns about the potential for an equity market downturn are making them less inclined to provide the funding components of deals that may be exposed in the event of a correction.”

The 2019 Preqin Private Debt Report is due for release soon, which contains more detailed fundraising data, as well as comprehensive data on fund managers, deals, investors, performance and much more. In the meantime, please take a look at our 2018 Fundraising Update or browse Insights for more of our recent research 

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