Recent years have seen the emergence of the private debt asset class as a mainstream private capital strategy; as of June 2015, global industry assets under management stood at $523bn, higher than that of the venture capital industry ($483bn). A survey of institutional investors in private debt for the 2016 Preqin Global Private Debt Report showed that 46% of respondents intend to commit more capital to private debt funds in 2016. Using the 227 fund searches and mandates of institutional and private wealth investors (defined as wealth managers and family offices) currently on Preqin’s Private Debt Online, this blog will analyze which opportunities these investors are currently seeking in the private debt asset class.
As shown in the chart above, the majority of both institutional and private wealth investors are looking to invest in direct lending strategies in the coming year. Mezzanine and distressed debt funds are also highly sought after by both investor types, although a greater proportion of institutional investors are looking to gain exposure to these types of vehicles. The greatest difference in the private debt strategy preferences of institutional and private wealth investors is evident in their planned exposure to special situations vehicles: a much greater proportion (32%) of institutional investors are seeking these opportunities over the next 12 months than private wealth investors (11%).
In terms of geographic preferences, 60% of private wealth investors are looking to invest in North America over the next 12 months, compared with 36% and 16% seeking opportunities in Europe and Asia-Pacific respectively. Similarly, 70% of institutional investors are also planning on investing in North America-focused private debt funds; however, 72% of institutional investors are looking to gain exposure to Europe-focused private debt strategies in the next 12 months. The Asia-Pacific region is a focus for 32% of institutional investors, but only for 16% of private wealth firms.