The global private debt market, also referred to as the alternative or non-bank lending industry, is fast approaching $500bn in assets under management. The industry has seen steady growth over recent years, with one of the most significant gains made through 2013, when AUM leapt up 16% in the space of a year. A lot of this growth has stemmed from the development of alternative lending across Europe, a market that has traditionally been dwarfed by the North American private debt industry.
Other Private Debt Industry Facts:
- Capital Available for Investment: The private debt industry currently has $154bn in committed capital ready to be invested, or dry powder, up from $139bn at the end of last year. Almost a third ($50.6bn) of this capital is for direct lending opportunities.
- Growth in Europe: Europe-focused private debt fundraising in 2014 accounted for 31% of capital raised globally, up from 23% of capital raised in 2013. Collectively, these funds raised $19.6bn in capital last year, up from $18.2bn the year before.
- Direct Lending Set for Further Growth: Fundraising for direct lending has already increased fourfold over the past three years ($7.1bn raised in 2012 compared to $29.1bn raised in 2014), yet this has the scope for increasing much further – 62% of investors named direct lending funds as presenting the best investment opportunities in the current market.
- Mezzanine Fundraising Halves: The amount of capital raised by mezzanine funds globally in 2014 ($8.6bn) was less than half the amount of capital raised by these funds in 2013. This is potentially due to these managers being under pressure from the growth of unitranche direct lending funds.
- Increasing Allocations: Buoyed by satisfaction with positive returns they have experienced, 57% of investors surveyed by Preqin in February intend to increase their allocation to private debt in the next 12 months, with 65% looking to increase their allocation over the longer term.
The data in this press release is drawn from Preqin’s inaugural 2015 Global Private Debt Report.
Third Point's Dan Loeb discusses their new positions in a letter to investor reviewed by ValueWalk. Stay tuned for more coverage. Loeb notes some new purchases as follows: Third Point’s investment in Grab is an excellent example of our ability to “lifecycle invest” by being a thought and financial partner from growth capital stages to Read More
“The assets under management in the private debt industry have grown rapidly in recent years. This has been spurred on by the growing opportunity of providing private companies with debt financing in the face of bank regulation. With growing investor appetite for the asset class and a rapidly increasing universe of managers offering private debt investment opportunities, this growth is set to continue.
Private debt presents a unique opportunity for investors given the current low yielding environment for traditional fixed income. The development of markets such as Europe and strategies such as direct lending provides numerous opportunities for investors to build dedicated and diverse allocations to the asset class. While it is predominantly large, sophisticated institutional investors that have the capacity to build dedicated allocations to private debt, we expect a more diverse base of investors to begin investing given the appeal of the asset class.”
Ryan Flanders – Head of Private Debt Products, Preqin