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Private debt fund managers closed 32 funds raising a combined $25bn in Q1 2021

Friday, April 16, 2021

Laxman Pai, Opalesque Asia:

Private debt fundraising slowed in the first quarter of 2021, hit by rising uncertainty around a pickup in inflation expectations, said a report.

According to Preqin Quarterly Update Private Debt Q1 2021, the quarter saw private debt fund managers closed 32 funds raising a combined $25bn - in line with historical averages but the lowest number of funds closing since 2016. This compares to 53 funds securing $27bn in Q1 2020.

"Inflation expectation and rising uncertainty have begun to weigh on the minds of debt investors. As a result, private debt investments may face increased competition for a place in portfolios," the report pointed out.

The fundraising environment has continued to get more competitive over the past five years. As of April 2021, 592 funds are in the market seeking to raise $300bn from investors.

Distressed debt and special situations strategies are garnering more attention from investors. In fact, 51% of investors plan to commit fresh capital to distressed strategies over the next 12 months while 49% are targeting special situations. This compares to only 42% and 30% respectively in Q1 2020.

"Given the more uncertain backdrop and the sheer volume of funds seeking capital, it is likely that competition for allocations will intensify as 2021 signs of progress," it said.

Meanwhile, as of September 2020, private debt AUM stands at $976bn, up from $887bn in June 2020. Direct lending remai......................

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