The evolution of the PDI 100

Private credit is having a “golden moment”. So says Blackstone Group’s president, Jonathan Gray. And the fundraising trends are certainly bearing that out.Private Debt Investor has ranked fund managers since 2013 by an annual list of private debt managers that measures the amount of capital raised over the previous five years for discreet private debt strategies.

First published in September 2013 as the PDI 30, the ranking has expanded along with the asset class to become the PDI 100. A comparison between the original PDI 30 and the top 30 of the 2022 PDI 100 list reveals the spectacular growth in fundraising over the last decade and the rise in the number of fund managers based outside the US.

Since its inception, the asset class has tripled to an estimated $1.2 trillion of assets under management in 2022.

Indeed, Ares Management, the top fundraiser on our 2022 PDI 100 list, hauled in more than $100 billion in a five-year period through 2022, with the top five raising more than $340 billion, compared with $322 billion in total capital raised by the top 30 private debt managers over five years when we published our inaugural list in 2013. Moreover, the debut list included BDCs, which we ranked separately in our 2022 survey.

Apollo Global Management topped the original PDI 30 list with $33 billion raised over the previous five years, followed by Oaktree Capital Management.

The mega-fund trend is likely to continue, with many managers routinely raising funds of more than $10 billion, despite a slowdown in fundraising. The top 10 private debt managers today account for nearly one-third of the AUM for the entire asset class. “A $10 billion lending fund today will be $30 billion in the future,” says Jess Larsen, founder and chief executive officer of advisory and placement agent Briarcliffe Credit Partners.

But Richard Wheelahan, co-founder of advisory firm Fund Finance Partners, believes that size may work against some of the largest GPs in the current climate, as their heft could saddle them with a systemically important designation. He expects that more innovative specialty credit shops will start garnering more attention. 

In contrast to our original list, which was heavily US-centric, many more European managers have taken their place among the biggest fundraisers, along with several from Asia, including India and Australia. 

In addition, “there are a growing number of long-only fixed income managers and investment banks moving up in the fundraising ranks, as they realised the importance of moving into private credit”, says David Conrod, founder and CEO of advisory FocusPoint Private Capital Group.

Here are some of the most significant changes in our list over the past decade.

1. Size matters

The giant managers who are out raising $20 billion-plus size funds are likely to keep growing, as they push further into the lucrative market for retail investors. Moreover, in any sort of market shakeout, the bigger managers may be apt to buy some of their smaller peers, particularly those who can add niche practices. 

2. Look out, private equity 

Macroeconomic changes and market saturation have necessarily sped up the expansion of traditional private equity managers into private debt, with the asset class now accounting for a majority of AUM in managers such as Apollo, which started out as a private equity manager. As if to illustrate the point, TPG, which was number 17 on our original list before its Sixth Street credit business split from the firm in 2020, in May agreed to pay $2.7 billion to buy Angelo Gordon, which placed 16th and 23rd in our inaugural and 2022 lists, respectively. 

3. Eastward, ho! 

Europe now represents almost one-third of our most recent list, rising from less than 10 percent of our debut ranking. In addition to the hubs of London and Paris, we expect to see more growth in Asia, including India and Australia, each of which is represented in our latest list. According to Alta, a blockchain-based digital exchange for alternative assets based in Singapore, and Aletheia Capital, the Asian private credit market has grown nearly 30 times in the past two decades.

4. Follow the money 

Whereas our original list included just Goldman Sachs, AXA International and Pacific Investment Management Co, the ranks of the long-only fixed income managers have swelled (albeit along with the size of our original list) with the likes of BlackRock, JPMorgan and Allianz Global Investors, among others, becoming some of the largest fundraisers in 2022. That is likely to continue, as interest in private debt among institutional and retail investors continues to grow. A recent report by Briarcliffe predicted that allocations to private debt will increase to nearly 6 percent in the next decade, from the current 3.8 percent. Expect the investment banks et al to follow that money trail. 

5. Diversification and specialisation beckon

As the corporate direct lending market matures, diversification is increasing from the traditional direct lending financing for sponsor-backed companies. For example, Monroe Capital, which placed 62 on our latest list, recently acquired venture debt specialist Horizon Technology Finance Management. Brookfield Asset Management, a large real estate lender that didn’t make it onto our original list, placed 31st on our most recent list. In 2019 it acquired 62 percent of established distressed debt investor Oaktree Capital Management, which in turn last year purchased a majority stake in net asset value lender 17Capital. 

Wheelahan notes that big private debt managers such as number one Ares, which ranked seventh in 2013, are branching out into real estate and secondaries sectors. Private debt managers “are becoming much more diverse, whether acquiring other teams or building them from the inside”, says Robert Molina, Briarcliffe’s head of origination.