North America: More capital committed, fewer GPs wanted

Our data shows investors flocking to North America debt funds, while also expressing a wish to limit their fund relationships.

Investors in North American private debt funds are committing large amounts of capital but want to reduce rather than expand their number of GP relationships, according to PDI data.

In the first half of this year, investors committed $26 billion to North America-focused private debt funds. This means 2017 as a whole is on course to surpass the record total of more than $40 billion raised for such funds in 2015.

Moreover, private debt proved a bigger draw for North America-focused capital than private real estate in the first six months of 2017. This is significant because, in data going back to 2012, North America-focused private real estate fundraising has surpassed that for private debt every year – although the margin was narrower last year than it had been in prior years.

The data also shows that attitudes to investing in North American private debt are more polarised than for other asset classes. While 25 percent of investors are planning to increase their allocations to the space, which is a similar percentage to that for other alternative asset classes, around 35 percent are not planning to commit to North American private debt at all – whereas, for North American private equity, the equivalent figure is around 5 percent.

Furthermore, almost 60 percent of investors in North American private debt say they are planning to reduce the number of GP relationships they have over the next 12 months, with less than 40 percent wanting to increase the number and a very small proportion not looking to change the number.

This is markedly different from the private equity, real estate and infrastructure asset classes, where the proportion of LPs wanting to reduce the number of relationships is much smaller. In private equity, only about 15 percent want to do so.

The $26 billion raised by North America-focused funds in H1 2017 was 40 percent of total private debt capital raised globally. The combined target amount for North America-focused funds currently in the market is $86.5 billion, including the $6.5 billion GSO Capital Solutions Fund III.