Commitments on the rise: The 2020 PDI Global Investor 30

Private Debt Investor is proud to present its second annual ranking of the world’s largest institutional private debt investors based on the market value of private debt portfolios. The ranking provides a valuable benchmarking tool for the industry, as well as a view of the largest private debt players.

Five things we learned from the Global Investor 30

1. Capital commitments continue to increase

The total capital commitments of the top 30 private debt managers has risen from $230 billion last year to more than $300 billion, a 30 percent increase. Likewise, the amount of money committed to private debt by the 10 largest firms has grown from $153 billion to $199 billion, as capital continues to flow into the hands of the biggest managers. A number of factors explain this flight to scale, with a perceived lack of diversification in the direct lending market driving consolidation of allocations by investors. The latter can also drive better economic terms by working with fewer, larger managers.

2. North American managers dominate

North America continues to dominate when it comes to capital commitments by regional headquarters of the top 30. The region’s allocations of more than $212 billion account for 70 percent of private debt commitments globally. European managers account for 26 percent and Asia-Pacific for just 4 percent.

Richard von Gusovius, co-head of global private credit at Campbell Lutyens, says North American firms have long dominated private markets: “Houses like KKR, Carlyle and Blackstone recognised alternatives as an industry and have driven proliferation of strategies, seeing themselves as asset managers rather than investors. They have achieved a real scale advantage.”

3. The Canadians are coming

There are now six Canada-based institutions in the GI 30, up from five last year, with three of the largest in the global top 10. The cumulative commitments made by Canada Pension Plan Investment Board, Manulife Investment Management and Ontario Teachers’ Pension Plan to private debt now top $50 billion. PSP Investments, Ontario Municipal Employees Retirement System and BCI are also in the top 30 global funds.

Public pension fund CPPIB is now the largest Canadian investor in private debt, overtaking insurer Manulife by a whisker and committing $23 billion to the asset class, equivalent to 7.1 percent of its allocations.

4. Subordinated/mezzanine is the most popular strategy

More than two-thirds of private debt investors globally have a preference for subordinated and mezzanine debt origination, with distressed the next most popular strategy. Senior debt origination and subordinated and mezzanine debt acquisition come next, in line with the preferences of investors last year.

Bill Ammons, founding partner and portfolio manager at AlbaCore Capital Group, says: “If you’re a manager that is good at responding to a dislocation, with pre-committed trigger capital, then in the credit markets you can make as much in a period of months as you could in years by moving at the right time. Investors will now be looking at having some capital dedicated to those types of opportunities so they can take advantage when they arise again.”

5. Investors are focused on Europe and North America

Europe and North America continue to be the focus for investor appetite in private debt, with Asia-Pacific and the Middle East and North Africa some way behind. Campbell Lutyens’ von Gusovius says: “We continue to see North American investors focused on investing in North American assets and European investors looking to deploy in Europe, and I don’t think covid is going to change that.”

GI 30 Methodology

The ranking is based on the market value of investors’ private debt investment portfolios. This is measured at a single point in time for all investors. For the 2020 ranking, this is 31 December 2019. This is a ranking of investors only and not funds of funds, private debt funds or banks.

What counts in the ranking

Private debt investment. This is defined as capital committed to a dedicated programme of investing in the debt of private companies, or the non-bank debt financing of leveraged buyouts, private infrastructure projects and private real estate. This includes distressed debt, funds of private debt funds, royalty financing, senior debt, subordinated/mezzanine debt, unitranche and venture debt.

Investor criteria. Both investors with a defined allocation to private debt, as well as those that are active investors in private debt funds but may not have a defined allocation, are considered. Where the investments are in a ‘grey area’, we reserve the right to make the final judgment based on applicability according to our definition. Investors’ definition of private debt may not entirely mirror the definition given above. Hence, we will use discretion to determine the most appropriate figure for each investor profiled.

Structures and strategies

Capital committed or invested through the following strategies is included:

• Funds (both open-end and closed-end)

• Separately managed accounts

• Commitments to fund managers that happen to be publicly traded

• Capital committed to co-investment vehicles

• Direct investments

• Proprietary capital only – we do not consider assets managed on behalf of third parties

Investors with direct lending platforms themselves are also considered for this ranking.

What the ranking excludes

Expected commitments. Pending or future commitments and investments or the uncommitted portion of an institution’s target allocation.

Hedge funds. Hedge fund strategies as these primarily target liquid securities or trading strategies.

Opportunistic investments. With these, there is no hard capital allocation to an investment programme.

Third-party capital. Capital raised from third parties for investment into private debt.

Research process

We seek to communicate directly by phone and email with investors to find out the market value of their private debt portfolio as described above. In the absence of primary data, the team gathers data from secondary sources and seeks to validate the researched figure with the investors themselves before we publish the final list.

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