Fundraising’s tale of two halves
Since Private Debt Investor launched a decade ago – the basis for our Decade issue, released this month – we have closely tracked fundraising for the asset class across its evolving array of strategies. We have witnessed the meteoric rise of an asset class considered a small, niche proposition in the 2000s into a major offering that has attracted many of the biggest private markets firms and institutional investors in the world.

The past decade of private debt fundraising shows an industry reaching maturity. Fundraising has proven to be resilient through several years of difficult macroeconomic conditions, the number of active managers in the asset class appears to have settled and big brand names have become established. The future also looks bright. With other sources of financing, such as banks, continuing to suffer from volatile market cycles, the business world will continue to look to alternative lenders for stability.

In 2012, closed-end private debt funds secured just $101.6 billion of capital from LPs. This rapidly increased to reach $279.5 billion in 2017, often seen as a landmark year for the asset class. This was driven primarily by a large proliferation of new fund managers, and the number of funds closed increased every year between 2013, when 289 vehicles closed, to 480 fund closes by 2019.

But the second half of the decade has been different. The amount of capital raised has become choppier, dipping to $205.1 billion in 2020 as the covid-19 pandemic disrupted the fundraising process for many managers, and reaching a new peak the following year with €289.4 billion raised. The number of fund closes also began to decline sharply after 2019. Just 257 funds closed in 2022, down by almost 50 percent from its peak.

The 10 largest fundraisers of the past 10 years have raised more than $600 billion between them.

Three funds raised have breached the $10 billion mark, with the other top fund closes each raising more than €5 billion. Among the top names in private debt, many were already familiar names in the private equity world, but there are also firms that have carved a name for themselves by focusing on the debt space.

Public pensions: less fear but no complacency over inflation
A new report from Ortec Finance says US public sector pension plans are anticipating a number of economic and market shocks, but that there has been an easing of inflation fears.

Marnix Engels, Ortec managing director, pension strategy, said: “The degree of uncertainty is extremely high for US public sector pension plan sponsors but there is genuine optimism that lower inflation will become well-established, with very few managers expecting it to be as high as it currently is within a year or two.”

The US inflation rate peaked at 9 percent in mid-2022. The most recent available figure is just above half that, 4.9 percent. More than half of the managers questioned (52 percent) believe that inflation could be at 3.3 percent or lower within the year. Only 10 percent believe it will be over 6 percent by then.

The waning of fear has not meant complacency. Two out of three managers surveyed say they will be increasing allocations to commodities to help hedge continuing inflation risks. Nearly one in three (32 percent) will increase allocations to inflation-linked bonds and 38 percent will increase allocations to gold.

Ortec Finance contracted with independent research concern PureProfile, which surveyed 50 US plan managers. The group collectively manages more than $1.315 trillion in public pension fund assets. It found increasing emphasis on scenario modelling and stress testing, given a general recognition that inflation and high interest rates following the covid pandemic have put their funded ratios under strain.

Next stops: Japan and Korea
A heads-up that our Private Debt Investor events calendar, which has already encompassed Singapore and London so far this year, takes us to Seoul and Tokyo between 26-29 June for Japan Korea Week.

The fifth iteration of our annual visit to two of Asia’s most important investor hubs has already attracted more than 300 Japanese and Korean institutions and global private debt leaders.

Among the keynote speakers at the event are Tadasu Matsuo, managing director and head of global alternative investments at Japan Science and Technology Agency; Andrew Lockhart, managing partner at Metrics Credit Partners; and Todd Leland, president of Goldman Sachs International.

If you haven’t already, make sure to book your place now!

Essentials