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Laxman Pai, Opalesque Asia: Investors in private debt are adopting a cautious approach to the next 12 months, amid global economic uncertainty, said Preqin. Investors are making adjustments to reduce risk in the uncertain year ahead.
According to the report, of the mandates issued for private debt funds in Q1 2020, the majority (73%) are for commitments to a single fund, which is up from 62% of mandates issued by investors in Q1 2019.
Additionally, the proportion of investors looking to add four to nine funds to their portfolio in the coming year has more than halved from 22% in Q1 2019 to just 10% in Q1 2020.
Investors retain confidence in private debt, however.
About a quarter (26%) are intending to commit more than $100mn to the asset class, which marks an increase of two percentage points from one year ago.
The proportion looking to commit $500mn or more has fallen from 10% in Q1 2019 to 7% in Q1 2020, though, and 55% are planning commitments of less than $50mn, up from 52% a year ago.
The strategies investors are targeting reflect the increasing economic uncertainty. Higher-risk distressed debt funds are less attractive to investors than this time last year, shown by the three-percentage-point drop in demand to 42% of mandates.
Appetite for direct lending has remained steady, with the same proportion of investors (49%) targeting the fund type as in Q1 2019. ...................... To view our full article Click here
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