Fundraising for corporate credit strategies falls 30% y-o-y

PDI data reveals a steep climb down in absolute terms from 2013’s record fundraising.

Private debt funds focused on corporate credit raised $50.3 billion in 2014, down almost 30 percent from 2013’s record total of $71.2 billion, according to PDI Research. The precipitous drop was unexpected and several market participants expressed their surprise at the figures in conversation with Private Debt Investor.

“That [fall in fundraising] is not really our experience,” said John Bohill, senior advisor at private market specialist, Stepstone Group. “Overall, I’m quite surprised because we are seeing a lot more interest in the area.”

The number of corporate credit funds closed also fell sharply to a total of 76 in 2014, from the 99 which closed the year before. The figures are based on data gathered by Private Equity International’s research and analytics group and is based on private submissions by investors and managers as well as publicly available information. There may be outstanding submissions leaving the totals subject to change.

Andrew Davies, a managing director and portfolio manager at CVC Credit Partners, agreed with Bohill that the 30 percent drop was unexpected and bore little resemblance to his experience of the market last year. Defying the wider market total, CVC Credit Partners had a strong fundraising year with $3.8 billion in commitments for its credit funds in 2014.

Davies pointed to the  fiercely competitive European leveraged finance market. “It does sound surprising given European primary volumes for 2014 and the continued competitive pricing of new issue. Our on-going interaction with the sell side did not indicate a shift or softening in market demand,” he said.

Bohill noted that some of the fall may be explained by the absence of several of the larger private debt players from fundraising markets in 2014 after they closed large funds in 2013. A smaller proportion of large funds making up the overall figure could help explain the fall. The lower fall in the number of funds closed – a 23 percent drop versus the 30 percent decrease in absolute cash raised – supports that supposition.

Fundraising for infrastructure debt strategies also plummeted by over half to $1.5 billion from the $3.11 billion raised in 2013. The 2014 total was raised by four funds versus five infrastructure debt vehicles closed in 2013, according to the research.

On the real estate side there was no precipitous fall. The 2014 total was $29.23 billion from 28 funds, a drop of around $2.7 billion from 2013’s total of $31.92 billion from 39 funds.