Debt managers 'raise $41.59bn in first half of 2015'

Seventy private debt funds raised $41.59 billion for final closes in the first six months of 2015, according to PDIResearch & Analytics.

After a slow first quarter ($13.77 billion), which was well down on the same period last year ($24.33 billion), private debt fundraising rebounded to almost match 2014’s first-half total of $42.96 billion and 2013’s first-half figure of $42.64 billion.

The top ten funds that reached final close in the second quarter included a number of names raising big vehicles, such as Lone Star Funds and Park Square Capital. The visibility of large managers ties in with a general private debt allocation trend that has developed among the largest US investors, said Tavneet Bakshi, partner and head of project management and due diligence with placement agent, First Avenue.

“We’ve witnessed the larger brands and credit platforms attracting the big allocations, particularly from the US state plans, so it doesn’t surprise me that there are so many of them on this list,” Bakshi said.

She added that much of the money being allocated to private credit by large US pension funds is now being handled within separately-managed accounts and in an SMA format.

Quarterly comparisons give little indication of overall fundraising projections for the year, beyond tracking the current momentum in the market, said Chris Leach, First Avenue partner and global head of private funds origination. However, year-on-year comparisons can be more instructive.

From that perspective, 2015 fundraising totals look steady with a strong momentum in the three months to June after a first quarter that was down on the same period a year earlier.

Looking forward, Leach sees some distinct trends developing in the debt fundraising market as more managers look towards interest rate rises and an uptick in special situations opportunities.

“At the moment, we remain in a broadly ‘risk-on’ yield-seeking environment and that should continue at least through to the end of the year. [But], looking further forward, we anticipate that there will be increased investor interest in credit opportunities and distressed strategies versus primary lending as the cycle turns and any US interest rate increases start to bite,” said Leach.

His view is confirmed by some of the funds-in-market data included in the PDI R&A report where more than half of the largest funds seeking capital from investors are for distressed debt strategies.

Another trend within private credit picked up in the report is the growth of sponsorless direct-lending funds. In an interview in the report, Dr Matthias Unser and Uwe Fleischhauer, founding partners of Yielco Investments, point to non-sponsor-backed direct lending as one of the most interesting private credit strategies.

That view was echoed by Arbour Partners’ James Newsome: “The private debt market is gradually reaching out to corporate Europe, with new and existing managers bringing together teams with the right networks and the credit skills to serve middle market firms. Arbour and our clients, such as Beechbrook and Pemberton, will continue to concentrate on the sponsorless sector where we see the opportunity evolving positively for borrowers and funds over coming years.”

With first-half totals at similar levels to capital raised in the first six months of the last two years and with even more managers raising capital – 390 vehicles seeking $199.83 billion in commitments – it seems likely that the full-year total could exceed last year’s $78.25 billion. Voters in PDI’s current poll certainly think so, with almost 65 percent predicting a year-on-year increase in corporate debt fundraising this year.