Identifying historic dry powder trends and connecting these with current market activity can be highly useful when offering suggestions as to what the future may hold for private debt fundraising. The chart below offers a snapshot of current market activity by identifying the 10 largest private debt funds currently in market.
The chart shows that seven of the top 10 largest funds are North America-focused. As recently highlighted in previous blogs discussing dry powder trends, data from Preqin’s Private Debt Online service has shown that estimated North America-focused dry powder for all private debt strategies currently stands at $118bn, constituting 62% of global private debt dry powder ($191bn). Collectively, this data is indicative of the continued appeal of the North American market and its importance to private debt fundraising momentum.
The three remaining funds in the league table are Europe-focused. Placing this within the context of the substantial increase in Europe-focused dry powder since 2010 demonstrates the attractiveness of the European market to private debt fund managers and investors. Since 2010, Europe-focused dry powder has grown by an enormous 248% to nearly $60bn at the end of 2015.
Equally important to note from the chart are the fund types, with distressed debt funds composing the largest proportion of the top 10; North America-focused distressed debt funds also currently hold the highest levels of committed capital. The significant growth of direct lending in recent years, especially within the European market, is evident in the top 10, which is rounded off by two Europe-focused direct lending funds. Direct lending funds have been highly important in driving fundraising growth and, consequently, in increasing the amount of dry powder in the private debt space.
By combining this data on current market activity with historic dry powder data, it can be argued that fund managers have been preparing for potential changes in macroeconomic conditions through increased direct lending fundraising and particularly through increased distressed debt fundraising. Furthermore, it is clear that North America and Europe continue to stand as the main beneficiaries of this fundraising activity.