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Alternative Market Briefing

Private debt market continues to flourish and is expected to top $1.4tn in next five years: Preqin

Thursday, March 21, 2019

Laxman Pai, Opalesque Asia:

Despite slowing growth, the private debt market continues to flourish and is expected to top $1.4tn within the next five years, said a report.

Approximately $100bn was raised by private debt funds in 2015 and again in 2016, matching the high watermark previously seen in 2008, pointed out a report by Preqin in collaboration SEI, titled 'Private Debt: Preparing for the Unkown'

Interest continued apace in 2017, as investors put almost $120bn into private debt funds. Assets under management skyrocketed from $245bn in 2008 to almost $667bn a decade later. They are projected to double again by 2023, it said.

In Q2 2018, the five largest private debt funds raised $28bn-or 66% of total assets raised. Investor attention is also being redirected among subcategories.

Interest in direct lending and mezzanine credit all but evaporated in Q2 2018 as investors turned instead to special situations. These developments suggest that we may not necessarily see more deal volume, but bigger transactions are almost guaranteed.

Who's investing?

While North American investors comprise 57% of the estimated 3,100 institutions in the asset class globally, they are not the biggest allocators to private debt products as a percentage of their overall portfolios.

That distinction belongs to institutional investors in Asia, who currently allocate an average of 5.9% of their portfolios to private debt funds.

European investors......................

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