Five fundraising takeaways from H1

With just over $63 billion having been raised by private debt funds globally in H1, the record-breaking year of 2017 (in which $256 billion was raised) looks a long way off. Mind you, there is some light at the end of the covid-19 tunnel. Here are five highlights from our interactive H1 fundraising presentation, which can be downloaded in full here.

1. The second quarter was stronger than expected after a lacklustre Q1. Nevertheless, the first half of 2020 recorded the lowest H1 fundraising total since 2015.

2. Funds are taking longer to raise due to covid-19 restrictions, which have limited the ability of fund managers and investors to meet.

3. Senior debt continues to be the most popular strategy, making up 40 percent of capital raised and 30 percent of funds closed in H1.

4. Multi-regional funds are the most popular by geography. Unusually, Europe raised more capital in the first half of this year than North America – though this would appear to be a short-term rather than a long-term trend.

5. The largest funds dominate the market. Total fundraising across the 10 largest vehicles was almost as much as all the other fund closes combined.

Here comes the wave… of UK SME defaults
Three million jobs in the UK could be at risk as a result of unsustainable levels of debt among SMEs, according to a report by lobby group TheCityUK.

The report projects there could be as much as £35 billion of unsustainable debt as a result of covid-19 loans, which it is feared have been extended with minimal due diligence. A significant wave of defaults is expected as government support schemes are withdrawn.

Simon Bonney, a UK-based SME insolvency expert at business advisory practice Quantuma, told PDI: “Lots of money has been loaned via CBILS and BBLS under huge government pressure, but Bounce Back Loans in particular have seen minimal due diligence.”

TheCityUK advised policymakers to create a UK recovery corporation to help oversee and manage those firms that have accumulated unsustainable levels of debt during the covid-19 crisis. It also called on the government to support funding on more manageable terms in order to encourage private sector investment over the long term.

Remote prospects for NAV facilities
In our Friday Letter, we considered the increasing use of – and the challenges arising from – net asset value-based fund finance facilities. We were subsequently contacted by Dominik Meyer, managing partner at Zug, Switzerland-based AXON Partners, who referred us to an NAV facility his firm put together during the “darkest hours” of the covid-19 lockdown.

Remarkably, the complex facility – which involved more than 50 parties and took from April until 10 days ago to complete – was undertaken without a single physical meeting. This remote working phenomenon really is catching on.