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Chart of the week: Managers look towards medium fund size

 The proportion of closed-ended private debt funds raising less than $100 million has fallen since 2010.


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So far this year only five percent of the closed-ended private debt funds which held a final close raised less than $100 million. This follows a general industry trend whereby the number of small funds targeting less than this amount is shrinking, whilst the proportion of mid-range funds – targeting between $100 million and $1 billion – continues to rise.

As we approach the end of May, $2.84 billion has been amassed across six vehicles throughout the month, all of which closed on a figure between $200 million and $600 million. By contrast, Lone Star Real Estate Fund V, which closed last month, raised $5.9 billion alone. Lone Star Real Estate Fund V is just one of the three megafunds closed in April, all of which raised more than $1 billion.

With such discrepancies between the amounts of capital being raised by different funds, PDI Research & Analytics looks at the trend of fund sizes since 2010.

The proportion of closed-ended private debt funds raising more than $1 billion dollars fluctuated around the 20 percent mark between 2010 and 2015. Simultaneously, there has been a reduction in the proportion of funds raising less than $100 million – 28 percent to 15 percent. The result of this drastic fall has resulted in the steady increase in the average size of these vehicles and a growing number of funds attracting between $100 million and $1 billion. Average fund sizes have grown by 43 percent since 2010, with a typical fund raised in 2016 expected to raise around $900 million.

Thus far, 18 percent of all funds closed in 2016 have raised more than $1 billion. With Oaktree Capital Management’s Opportunities Fund Xb, Blackstone’s GSO Capital Opportunities Fund III and Highbridge Principal Strategies’ Mezzanine Partners III currently fundraising with targets of over $5 billion each, we may see this proportion rise as the year progresses. On the other hand, of the 384 funds currently in market, 58 are targeting less than $100 million. It remains to be seen whether this will increase the proportion of small funds closing later this year.