Opalesque Industry Update - 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. 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 increase in investor preference for exposure to direct lending funds is reflected in the amount of vehicles raised in recent years. This shift towards direct lending vehicles is likely due to the market opportunity for lending by non - bank entities in the wake of financial regu lation and bank deleveraging, as well as the fund type providing favourable risk/return profiles compared to other similar investments. This continued growth in non - bank lending or alternative credit bodes well for the middle market borrower whose needs for capital has not been filed via the traditional banking relationship. Exposure to this evolving asset class may continue to be attractive to institutional investors in a low - yield environment. Preqin has witnessed many investors set up dedicated allocations to the asset class, which looks set to continue as private debt grows and becomes more defined throughout 2015," said Ryan Flanders –Head of Private Debt Products, Preqin. PD |
Industry Updates
Direct lending set to spur further growth in the private debt alternative asset class
Friday, November 14, 2014
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