Private debt continues to surge

The 2016 Preqin Global Private Debt Report finds that the industry continued its robust growth in 2015, with total assets under management (AUM) reaching US$523 billion as of June. This extends the year-on-year growth in AUM seen since 2006, when combined assets under management totalled $156 billion. The largest proportion of these assets are held in distressed debt funds, which have a combined $199 billion in AUM. Mezzanine funds hold $130 billion, while direct lending funds have seen the fastest rate of growth, and now oversee $115 billion in total assets.

In particular, growth in the European private debt market has been rapid, and funds focused on the region accounted for 35 percent of the $85 billion raised by private debt funds globally in 2015, the highest annual proportion ever recorded. The key driver in this area has been the direct lending market, which secured $19 billion in investor commitments in 2015 and now holds $29 billion in dry powder available for investment. This level of fundraising significantly surpasses the $13 billion raised by North America-focused direct lending funds through the year, the first time this has occurred.

Key 2016 Global Private Debt Report Facts:

  •  Dry Powder: Total dry powder in the private debt industry stands at $191 billion as of the end of 2015. Despite representing the largest proportion of this, $120 billion worth of North America-focused dry powder does not match the record $124 billion seen at the end of 2013.
  •  AUM by Vintage Year: Private debt funds with 2013 – 2015 vintages hold $223 billion of total industry assets, reflecting the growth of the asset class in recent years. Funds with vintages prior to 2010 currently hold $145 billion in total.
  •  Funds in Market: As of February 2016, there are 260 private debt funds on the road seeking aggregate capital commitments of $123 billion. This is an increase in the number of funds compared to the same point the previous year (234) but a decrease in the aggregate target capital ($130 billion).
  •  Asia and Rest of World: Asia and Rest of World secured just 7 percent of capital committed to the industry globally, raising $5.7 billion. However, private debt is growing in prevalence in these regions, and there are currently 42 funds in market targeting a combined $11 billion.
  •  Investor Confidence: Given the growth in private debt, it is unsurprising that over a quarter (26 percent) of investors have grown in confidence in the asset class over the past twelve months, and just 7 percent have reduced in confidence, notes Preqin. The majority of investors (54 percent) generally perceive the private debt industry positively.