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Alternative Market Briefing

Private debt AUM near $1.21tn for 2021, after a decade of 13.5% annual growth

Thursday, January 20, 2022

Laxman Pai, Opalesque Asia:

Private debt assets under management (AUM) near $1.21tn for the full year, off the back of a decade of 13.5% annual growth, said a study.

According to the 2022 Global Private Debt Report, published by Preqin, private debt will continue to grow, with AUM more than doubling to $2.69tn by 2026.

Providing further evidence that the private debt market is rapidly expanding, deal volume has dropped almost 12% annually over the three years ending 2020, despite a modest uptick in transaction values.

Based on data to Q3 2021, deal activity should end the year on a similar level to 2020. The trend of fewer yet larger deals is indicative of a greater number of larger funds, or those able to make significant commitments. The result for the end investor may end up being more concentrated portfolios and lower returns.

Among the strategies pursued by private debt funds, direct lending and distressed debt make up about 60% of AUM in the asset class. According to Preqin data, direct lending will remain the largest strategy, with investors attracted to its more stable return profile in volatile markets. The strategy's AUM ($452bn) is now nearly double that of the second-largest strategy, distressed debt ($277bn).

Among investors surveyed by Preqin in November 2021, 36% said they looked to private debt for a reliable income stream, while 37% were attracted to its high risk-adjusted returns. Environmental, social, and governance (ESG) is also of grow......................

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