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  • PREQIN QUARTERLY UPDATE: PRIVATE DEBT Q1 2017 Insight on the quarter from the leading provider of alternative assets data

    alternative assets. intelligent data.

    Content includes:

    Fundraising Funds in Market Institutional Investors Dry Powder

  • © Preqin Ltd. 2017 / www.preqin.com2

    PREQIN QUARTERLY UPDATE: PRIVATE DEBT, Q1 2017

    FOREWORD - Ryan Flanders, Preqin

    Eighteen private debt funds reached a fi nal close in the fi rst quarter of 2017, securing just under $20bn. Capital commitments in the quarter were strong, with $7bn more secured than in the same quarter last year, despite fewer funds closing. Private debt globally is coming off the strongest three-month period in the history of the asset class, with $50bn secured across 46 funds in Q4 2016.

    Investor appetite has held fi rm for North America- and Europe-focused funds, with both regions seeing eight funds close in Q1, although North America-focused funds secured nearly $2bn more than Europe-focused vehicles. Direct lending funds closed the period with the most vehicles (10) and aggregate capital secured ($11.9bn), while distressed debt funds secured $4.2bn, followed by special situations funds closing on $2.6bn in commitments.

    2017 is certainly off to a strong start, specifi cally bolstered by the highly active direct lending segment in the US. Fund managers across strategies are seeing increased and sustained investor appetite for access to all parts of the market at this point in the credit cycle, when a hybrid of private debt strategies are poised to return strong results. Finally, with 284 private debt funds in market globally targeting more than $112bn, competition for investor allocations will remain fi erce for the remainder of 2017.

    We hope that you fi nd this report useful and welcome any feedback you have. For more information, please visit wwww.preqin.com or contact info@preqin.com.

    All rights reserved. The entire contents of Preqin Quarterly Update: Private Debt, Q1 2017 are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Preqin Quarterly Update: Private Debt, Q1 2017 is for information purposes only and does not constitute and should not be construed as a solicitation or other off er, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent fi nancial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for any decisions of whatever nature the reader makes or refrains from making following its use of Preqin Quarterly Update: Private Debt, Q1 2017. While reasonable eff orts have been made to obtain information from sources that are believed to be accurate, and to confi rm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warranty that the information or opinions contained in Preqin Quarterly Update: Private Debt, Q1 2017 are accurate, reliable, up-to-date or complete. Although every reasonable eff ort has been made to ensure the accuracy of this publication Preqin Ltd. does not accept any responsibility for any errors or omissions within Preqin Quarterly Update: Private Debt, Q1 2017 or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication.

    p3 Fundraising p4 Funds in Market p5 Institutional Investors p6 Dry Powder

    PRIVATE DEBT ONLINE

    Private Debt Online is the leading source of data and intelligence on the growing private debt industry and tracks all aspects of the asset class, including fund managers, fund performance, fundraising, institutional investors and more.

    Constantly updated by our team of dedicated researchers, Private Debt Online represents the most complete source of industry intelligence available today, with global coverage and all fund managers and investors profi led.

    Get in touch today to arrange a demo of Private Debt Online: : info@preqin.com | : www.preqin.com/privatedebt

  • 3

    DOWNLOAD DATA PACK: www.preqin.com/quarterlyupdate

    FUNDRAISING

    Eighteen private debt funds reached a fi nal close in Q1 2017, totalling just under $20bn in capital commitments (Fig. 1), well behind the previous quarter, which saw 46 funds close for a record $50bn. Quarterly fundraising since 2013 has seen an average of 38 funds secure around $22bn in aggregate capital; no other quarter since Q1 2013 has had fewer than 26 fund closures.

    North America- and Europe-focused funds each had eight closings in Q1, totalling $11bn and $9bn respectively, and two Asia- focused vehicles closed (Fig. 2).

    Direct lending vehicles raised more than half ($11.9bn) of all capital secured by private debt funds closed in Q1 2017, followed by $4.2bn from two distressed debt funds (Fig. 3). Mezzanine accounted for the smallest amount of capital, with $1.2bn raised via four funds, while two special situations funds raised $2.6bn. Private debt funds of funds and venture debt vehicles did not see any closings in the fi rst quarter.

    Hayfi n Capital Management’s Hayfi n Direct Lending Fund II was the largest fund closed in the fi rst quarter of 2017 (€3.6bn), and Alcentra Group’s Alcentra European Direct Lending Fund II secured €2.8bn; both are targeting European direct lending opportunities (Fig. 4).

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    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

    2013 2014 2015 2016 2017

    No. of Funds Closed Aggregate Capital Raised ($bn)

    Source: Preqin Private Debt Online

    Date of Final Close

    Fig. 1: Private Debt Fundraising, Q1 2013 - Q1 2017

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    North America Europe Asia & Rest of World

    No. of Funds Closed Aggregate Capital Raised ($bn)

    Source: Preqin Private Debt Online

    Primary Geographic Focus

    Fig. 2: Private Debt Fundraising in Q1 2017 by Primary Geographic Focus

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    Distressed Debt Mezzanine Direct Lending Special Situations

    No. of Funds Closed Aggregate Capital Raised ($bn)

    Source: Preqin Private Debt Online

    Fund Type

    Fig. 3: Private Debt Fundraising in Q1 2017 by Fund Type

    Fig. 4: Five Largest Private Debt Funds Closed in Q1 2017

    Fund Firm Fund Size (mn) Type Geographic Focus

    Hayfi n Direct Lending Fund II Hayfi n Capital Management 3,600 EUR Direct Lending Europe

    Alcentra European Direct Lending Fund II Alcentra Group 2,807 EUR Direct Lending Europe

    Carlyle Strategic Partners IV Carlyle Group 2,500 USD Distressed Debt US

    Marlin Equity Partners V Marlin Equity Partners 2,500 USD Special Situations US

    Cerberus Levered Loan Opportunities Fund III Cerberus Capital Management 2,050 USD Direct Lending US

    Source: Preqin Private Debt Online

  • © Preqin Ltd. 2017 / www.preqin.com4

    PREQIN QUARTERLY UPDATE: PRIVATE DEBT, Q1 2017

    FUNDS IN MARKET

    As at the start of Q2 2017, there were 284 private debt funds seeking an aggregate $112bn in capital. These fi gures are roughly the same as they were in Q1 2016, when 260 funds were targeting $123bn globally.

    Direct lending vehicles continue to represent the largest proportions of both funds in market and aggregate capital targeted, with 126 funds seeking $43bn (Fig. 5). Thirty-nine distressed debt funds are in market targeting just over $34bn, while 33 special situations funds seek $16bn in capital.

    North America-, Asia- and Rest of World-focused funds have each seen a rise in the number of private debt vehicles in market compared to Q1 2016, while there are six fewer targeting Europe (Fig. 6).

    More than three-quarters (77%) of private debt funds in market have been on the road for two years or less. The largest proportion (35%) of private debt funds in market have been on the road for 13-24 months, whereas 24% have been fundraising for six months or less (Fig. 7).

    The fi ve largest funds in market account for 18% of total capital targeted within the private debt asset class. GSO Capital Solutions Fund III, the largest fund in market, is currently seeking $6.5bn for distressed debt opportunities in North America (Fig. 8).

    44% 38%

    14% 31%

    22% 13%

    12% 14%

    4% 2%5% 1%

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    No. of Funds Raising Aggregate Capital Targeted ($bn)

    Venture Debt

    Private Debt Fund of Funds

    Special Situations

    Mezzanine

    Distressed Debt

    Direct Lending

    Source: Preqin Private Debt Online

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