Direct Lending Funds Drive Private Debt Fundraising in Q3 2015 by Preqin

Direct lending funds closed in Q3 raised $9bn, 47% of the industry total, as private debt fundraising increased from Q2 totals.

Preqin’s Q3 private debt report reveals that direct lending funds in market continue to be the largest part of the private debt market, accounting for $9bn of the $19.3bn raised by private debt funds closed in the quarter. Half of the 10 largest funds closed in Q3 were direct lending funds, and 42% of private debt funds currently in market follow this strategy. This class also accounted for the highest number of funds closed (11) and the greatest aggregate capital raised ($9.0bn). With over two-thirds (68%) of LPs targeting direct lending over the next year, it looks likely to remain the most sought after strategy for investors in private debt.

Direct Lending

Direct Lending – Other Key Private Debt Industry Facts:

  • Total Fundraising: Twenty-seven private debt funds held a final close in Q3, securing an aggregate $19.3bn in commitments. This is an increase from the $17.8bn raised in Q2, but has yet to match fundraising levels seen at the start of the year.
  • European Fundraising: For the first time this year, Europe-focused funds were the region to raise the most capital, securing $10.3bn in investor commitments. North America-focused fundraising fell 32% to $7.9bn in Q3, down from $11.6bn in the previous quarter.
  • Funds in Market: At the start of Q4, there were 224 private debt funds in market, targeting a combined $117bn in capital. 116 North America-focused funds are targeting the most capital ($65.8bn), while 67 Europe-focused funds are targeting $37.4bn, less than at the start of Q3.
  • Time on the Road: Forty-two percent of private debt funds currently in market have been on the road for a year or less, in line with previous quarters. However, 30% have been in market for more than two years, up from 27% at the start of Q3.
  • Record Dry Powder Levels: Dry powder levels at the end of Q3 reached a record $191bn, up 37% from December 2014. European dry powder has increased by 66% in 2015 so far, and now stands at $61bn, while North American dry powder stands at $118bn.

Direct Lending

Comment:

“The private debt industry continues to flourish in North America and Europe, once again supported by strong direct lending fundraising figures. Closing the most funds and raising the greatest amount of capital, direct lending is driving a profitable private debt industry whose funds in market are seeking an aggregate $117bn.

Direct Lending

Overall, Q3 fundraising figures have increased from the totals seen in Q2, although they have yet to match the strong fundraisings seen at the start of the year. However, with several large funds currently in market, private debt fundraising is likely to remain strong in the coming months.”

Direct Lending

Ryan Flanders – Head of Private Debt Products, Preqin