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Alternative Market Briefing

Private debt industry shows significant growth potential

Monday, February 25, 2019

Laxman Pai, Opalesque Asia:

Private debt industry as an asset class has matured considerably in recent years, reaching $769bn in assets under management as of the end of June 2018, a report said.

Furthermore, there is still considerable room for growth in the industry: just 25% of institutions currently allocate to private debt, and many of them remain below their target allocations.

According to 2019 Preqin Global Private Debt Report, record buyout deal activity and a potential market downturn could also create plentiful investment opportunities for private debt in the months ahead. But the environment is becoming increasingly challenging, particularly for first-time funds.

Interest rate rises and competition for deals have compressed yields, and investor concern about the market cycle is leading them to prioritize larger managers with established track records.

"Private debt funds are at a crossroads at the start of 2019: on the one hand, the asset class is racking up consecutive successes in fundraising, AUM growth and performance. On the other hand, the indications are the market will only get more unforgiving from hereon in: the industry faces unprecedented competition, and the high returns that have marked historical performance are increasingly difficult to achieve," said Tom Carr, Head of Private Debt.

He added: "The key questions for the asset class then are if it is able to diversify enough to remain attractive to investors, and if it can prove ......................

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