Nearly 72% of institutional investors active in the private debt asset class plan to invest in direct lending funds over the next 12 months, a higher proportion than for any other private debt fund type.
Direct lending funds have continued to gain traction in the private debt marketplace, and are the prevailing strategy for private debt fund managers established since 2008.
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Almost three-quarters of institutional investors active in the private debt space plan to allocate fresh capital in the coming year to direct lending funds, which are often considered a better fit for more conservative investors in the private debt market, given their similar structure to fixed income investments compared to more private equity-style methods such as mezzanine and distressed debt funds.
Fundraising in the private debt space reached a peak in 2013, when 137 private debt funds raised an aggregate $77bn in capital. While fundraising so far in 2014 has seen a dip, with 69 funds raising a total of $37bn in capital, funds currently in market are targeting in excess of $100bn, highlighting the capacity the market has for significant growth in 2015 and beyond.
Other Key Facts on the Private Debt Marketplace:
- The number of private debt funds closed in 2013 (137) was up 46% on 2012 (94).
- Europe has accounted for its biggest share of overall fundraising, with 33% of capital raised by funds closed in 2014 so far focused on the continent, compared to 21% in 2013.
- 40% of private debt fund managers established since 2008 have a primary strategy of direct lending, compared to 36% which are focused on mezzanine investments.
- Direct lending funds of vintage 2001-2011 have a median net IRR of 8.9%.
- While half (48%) of investors allocate to private debt from their private equity allocations, 8% invest from their fixed income portfolios. A further 9% invest from a dedicated private debt allocation at present.
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By GlobalData
