Chart of the week: Mezzanine fundraising is in decline

Q1 2016 closed-ended mezzanine and subordinated debt funds raised less than 30 percent of the Q1 2015 total.


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With ten mezzanine and subordinated debt funds having closed in the first quarter of 2016, PDI Research & Analytics analyses how mezzanine debt fundraising compares to other strategies.

Mezzanine and subordinated debt vehicles attracted significant interest from investors during the first quarter of 2016, raising $4.35 billion, more than any other strategy so far this year. First Israel Mezzanine Investors Fund’s FIMI Opportunity VI is the largest of these to hold a final close, at $1.1 billion.

While interest in mezzanine debt funds remains strong when compared with other strategies, the Q1 2016 figure is a dramatic fall from the same period last year – less than 30 percent of the $15.11 billion raised in Q1 2015.

This slowdown is not unique to mezzanine and subordinated debt funds. So far this year $12.72 billion has been raised from mezzanine debt, distressed debt, senior debt, venture debt and collateralised loan obligations.

When compared with the $21.16 billion raised by the same strategies in the first quarter of 2015, it is clear that the market has experienced a decline in 2016.

This coincides with geopolitical uncertainty and fears of economic downturn. However fundraising typically gathers momentum as the year progresses and often looks sluggish in the opening quarter.

Distressed debt vehicles have shown a marked increase in fundraising at the beginning of 2016. The strategy has attracted $4.2 billion so far this year, across three funds, whereas no distressed debt funds were raised across the same time period last year.