Q2 2018 was the third-largest fundraising quarter ever seen for private debt, as 36 funds secured a combined $42bn. This pace of fundraising has not been maintained in Q3, however, with 31 funds closed in the quarter raising a total of $24bn. Preqin expects these figures to rise by up to 10% as more information becomes available, but it nonetheless seems unlikely that the quarter will match Q2.
North America-focused funds are principally accountable for the slowdown: whereas 19 funds focused on the region raised over $30bn in Q2, by contrast 16 North America-focused funds raised just $13bn in Q3. A further eight Europe-focused funds raised $10bn, while seven funds focused outside of these regions secured $1.2bn.
Direct lending led fundraising activity this quarter, with 15 direct lending funds raising $19bn. In fact, eight of the 10 largest funds closed in Q3 were direct lending vehicles, including the largest fund of the quarter – the €6.5bn Ares Capital Europe IV. Eight mezzanine funds secured $1.5bn and four distressed debt funds raised $2.4bn.
The average time spent in market has dropped from 16 months for funds closed in 2017 to 15 months for funds closed in Q1-Q3 2018. Seventy-one percent of funds met or exceeded their target size in Q1-Q3 2018, with almost a third (30%) of funds exceeding their initial target size by 125% of more.
Despite the fundraising slowdown, the quarter has remained on par with levels seen in Q1-Q3 2017 and indicates that robust activity is still ongoing. In fact, with $86bn already secured in the first three quarters of 2018, the year could still potentially set a new full-year fundraising record.
Please click here to see more Q3 private debt statistics.