Private Debt Dry Powder: Europe- and North America-Based Managers Seeing Fundraising Success

by Adham Abdelraouf

  • 13 Nov 2015
  • PD

According to Preqin’s Private Debt Online database, a build-up of private debt dry powder in the form of committed capital has been accruing, in spite of the high levels of fundraising success and the attention the private debt space has attracted over recent years. Since 2010, North America-focused private debt dry powder has increased by 33% to approximately $120bn overall, while Europe-focused dry powder has seen a staggering 248% increase to nearly $60bn at the end of 2015. Although both regions are undoubtedly on a different scale, it is apparent that overall fundraising within the asset class is currently outpacing deal flow for alternative lenders. However, this dichotomy is not necessarily a negative sign for the asset class, as it could be an indication that fund managers are in fact upholding diligence and underwriting standards despite excess capital supply.

The chart above illustrates historical dry powder levels for North America- and Europe-focused private debt funds since 2006. This period has seen successful fundraising for many private debt sub-strategies and the asset class in general. With the diversity of strategies offered within the private debt spectrum, as developed economies enter different stages of a credit cycle, appropriate strategies can be employed by skilled alternative lenders in order to exploit those cycles, as seen in the breakdown of overall dry powder by strategy. For example, as North America and Europe are in the late stages of economic expansion emerging from the financial crisis, the largest proportion of private debt dry powder is currently held in distressed debt funds (32% in North America and 27% in Europe); this is likely due to fund managers predicting a period of uncertainty and thus preparing resources. Regardless of timing, private debt managers employing the primary strategies have been, and will likely continue to be, aided by institutional support for private debt vehicles in coming years. 

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