Private debt poised for record fundraising year – exclusive

With $119.5bn already raised by the end of the third quarter, this year seems almost certain to move past the previous peak of $130.1bn in 2013.

Preliminary fundraising figures through the third quarter of 2017 appear to confirm that those raising capital for investment in the private debt asset class have never had it so good.

Almost $119.5 billion was raised by firms for private debt strategies in the first three quarters, according to preliminary figures based on PDI data. This means the previous annual fundraising record of $130.1 billion in 2013 should be comfortably surpassed.

This is all the more likely since the fourth quarter in previous years has typically been the most fruitful quarter for fundraising. Since 2013, the average amount raised in the fourth quarter has been $37.1 billion. Taking that figure and adding it to the amount raised by the end of Q3 would mean an eventual 2017 fundraising total of almost $157 billion.

By far the largest individual fundraising is the $24.7 billion so far raised by Apollo Global Management for its Apollo Investment Fund IX. While the entire amount is included in our figures, we reported earlier this year that only around 20-25 percent of the fund is slated for debt investment (according to a State of Connecticut Retirement Plans and Trust Funds document obtained by sister title Private Equity International).

However, even if only 20 percent of the Apollo fund total were included in our figures (and taking the Q4 average amount referred to above), this year would still be on course to break the previous record with a total of almost $137 billion.

After Apollo’s Fund IX, other large fundraisings so far this year include Castlelake’s Castlelake Fund V ($2.4 billion) and Antares Capital’s Antares CLO 2017-1 ($2.1 billion).

The fundraising figures will do little to ease the concerns of those who believe the private debt market is showing signs of overheating, with competition increasing and capital deployment becoming more of a challenge.

This is particularly noted in the direct lending space. One unnamed market observer recently told PDI: “A certain proportion of direct lenders are not as stringent as they should be. They are certainly relaxing terms and due diligence requirements, and pushing up leverage levels beyond what I would be comfortable with.”