Chart of the week: Europe-focused debt fundraising

 Senior and mezzanine debt strategies dominate European debt fundraising


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The chart breaks down Europe-focused private debt closed-ended fundraising over the period 2008-Q1 2015. Royalty financing, venture debt and CLO were overlooked as they constitute niche strategies for European fundraising. Funds of private debt funds were also not considered as the vast majority of these have a global remit.

In 2014, private debt fundraising, in particular vehicles targeting senior and mezzanine/subordinated opportunities, were at a seven year peak in Europe. Distressed debt, although high in terms of amount raised compared to the financial crisis period, significantly decreased in terms of proportion, representing only 15 percent of the total over the last two years compared to an average of 37 percent of the total between 2008 and 2012. By contrast, senior debt and subordinated debt have gained significant ground since 2012.

The chart highlights the cyclical nature of distressed debt fundraising, with sharp changes between the crisis and post-crisis periods. This illustrates periods of highly profitable and less profitable opportunities: of the European funds closed in 2012, 90 percent were raised during the 2010-2012 period.

Over the eight-year span we notice a balance between senior and mezzanine debt fundraising as fund managers regularly use them in conjunction, but the most recent data places senior debt as favourite. The first quarter of 2015 confirms the trend, with a large dominance of senior and mezzanine debt strategies and a preference for senior debt until now. The largest senior debt vehicle closed in Q1 2015 is the European Loan Programme managed by Ares Management, which gathered $3.32 billion from investors.