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North America-Focused Private Debt Dry Powder and Fundraising – October 2016

by Brian Lee

  • 21 Oct 2016
  • PD

According to Preqin’s Private Debt Online, as of October 2016, estimated North America-focused dry powder for all private debt strategies currently stands at $128.3bn, accounting for a notable 65.7% of global private debt dry powder ($195.3bn). This figure surpasses previous record levels of untapped capital from the end of 2013 ($123.6bn). Although institutional investor appetite has driven fund commitments, dry powder has continued to accumulate among fund managers in the industry. This does not necessarily signify a foreboding future for the asset class, but rather the need for fund managers to continue accessing investment opportunities across the private lending spectrum.

Analyzing trends in historical dry powder levels and the current funds in market for North America-focused firms may lend insight into the direction of private debt fundraising. The table above shows the largest private debt funds in market; it is evident that North America continues to be a driving force in private debt fundraising momentum. Although Europe-focused private debt fund managers have seen growth in popularity recently, nine of the 10 largest funds in market are targeting investment opportunities in North America. Furthermore, private debt funds focused on North America are targeting an aggregate $96.8bn, compared with $37.1bn for Europe-focused funds.

Five of the 10 largest funds in market follow a distressed debt strategy; these funds account for almost half of the aggregate capital targeted by the 10 largest funds raising capital. Two of the three largest funds in market are mezzanine vehicles: GSO Capital Opportunities Fund III and Highbridge Mezzanine Fund III are seeking $6bn and $5bn respectively for investment in the US.

Over the past few years, distressed debt and mezzanine strategies have seen an increase in dry powder levels, while direct lending dry powder has decreased. Fundraising progress continues across all strategies, however, as managers and investors alike prepare for a changing economic landscape that could dictate new alternative lending prospects into 2017.

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