Private Debt Fundraising Update: Q3 2016

by Thomas Mulready

  • 27 Oct 2016
  • PD

According to Preqin Quarterly Update: Private Debt, Q3 2016, aggregate capital raised for private debt funds in Q3 2016 fell to $11bn following a robust Q2 in which $20.1bn was raised. Early indications suggest that, with total capital raised by private debt funds in 2016 so far currently sitting at $40.6bn, the year-end 2016 total could be lower than that of 2015, when $96.2bn was raised by 150 private debt funds closed – a record high.

This fall in the amount of capital raised by funds closed in 2016 so far is not necessarily an indication that fund manager or institutional investor appetite for the asset class is slowing. In fact, Preqin data on Private Debt Online suggests that the opposite may be true. For example, Oaktree Opportunities Fund Xb, one of the largest private debt funds ever raised, is now on its fifth close and has surpassed its initial target size by nearly $1bn following commitments from some of the largest public pension funds in the US. Further to this, the number of funds in market has also continued to grow over 2016. In January, there were 259 private debt funds in market targeting an aggregate $146bn; at the beginning of Q4 2016, this had increased to 304funds targeting an aggregate $147bn globally.

According to Preqin’s Private Debt Online, 66% of active investors in the asset class have indicated that they will actively invest or will consider investing in private debt funds in the next 12 months; only 34% have indicated that they will not be looking to invest over the coming year. Further to this, recent large commitments to private debt funds, such as Pennsylvania’s Public School Employees' Retirement System’s recent $200mn allocation to Apollo Global Management’s European Principal Finance Fund III, indicates continued investor commitment to the asset class.

Despite the decrease in aggregate capital raised in 2016 so far, Preqin’s historical fundraising data shows that private debt fundraising has continued to rise each year since 2012, indicating a prevailing interest in the asset class. Further to this, private debt may continue to offer investors the chance to achieve attractive returns, particularly in the current low interest environment, as well as add a further element of diversification to an alternative assets portfolio.

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