Debt fundraising plunges in first quarter of 2020

The coronavirus crisis has helped push fundraising even lower in 2020 after several years of decline.

Private debt fundraising in the first quarter has fallen to its lowest level in more than six years, according to preliminary data from the Private Debt Investor Fundraising Report.

The data show that total Q1 confirmed fundraising by private debt funds reached just $20.6 billion across 24 funds.

The next lowest Q1 fundraising total was seen in 2014, a time when private debt was relatively immature as an asset class, with $26.1 billion raised.

Record low fundraising figures could be due to the impact of the coronavirus pandemic on raising new money. Many fund managers are switching focus to existing LPs as they are unable to travel to meet new prospects and as the crisis continues fund managers are thought to be putting more focus on managing existing portfolios than raising new capital.

However, first quarter fundraising also follows a downward trajectory seen in private debt fundraising since 2017 as firms seek to deploy record volumes of capital raised in recent years. It is not known if fundraising activity will pick up when coronavirus restrictions are lifted and the world economy begins to grow again.

Fund numbers have also been declining in recent years. Based on current trends there could be less than 100 fund closes in 2020. However, the size of funds continues to increase and despite slow movement in Q1 the average fund size was €861 million with several funds closing at more than $1 billion.

Watch out for the full Q1 Fundraising Report on Private Debt Investor next week.