Private debt fared well during a strained 2020

Fundraising was robust with capital concentration intensifying

Private debt assets under management (AUM) continued to grow despite the global pandemic. As of June 2020, AUM stood at $887 billion, making private debt the third largest private capital asset class. Although slightly below 2019 totals, fundraising was robust over 2020 – 200 funds closed raising an aggregate $118 billion.

Capital concentration intensified, with the 10 largest funds raising 39% of the total, up from 31% in 2019. Special situations and distressed debt funds have been an area of growth, with the proportion of capital for these strategies climbing from 16% in 2009 to 40% in 2020.

Special situations funds in market have sharply increased, with 79 on the road, a 464% increase from a year ago. The largest distressed debt fund in market is seeking $15 billion in capital.

“Private debt markets have proven their maturity throughout the last year, adapting as needed in a challenging environment. The largest managers increased their influence, accounting for a growing share of the aggregate capital raised. This growing demand from investors, met by the fund management industry, should lead to further strong growth from the asset class. Preqin forecasts that private debt AUM will reach $1.46 trillion in 2025,” said David Lowery, Head of Research Insights of Preqin in a note on February 4.

Key Private Debt Facts:

• As of June 2020, private debt AUM stands at $887 billion, up from $842 billion in December 2019. Private debt is now the third largest asset class in private capital, behind only private equity and real estate.

• In 2020, private debt fund managers closed 200 funds raising an aggregate of $118 billion. This is slightly below the 223 funds closed and $132 billion secured in 2019.

• Of the total capital raised in 2020, 39% was secured by the top 10 funds, up from 31% in 2019.

• There are currently 79 special situations funds in market, up from 14 in 2019. The largest distressed debt fund on the road is seeking $15 billion.

• Almost half (47%) of investors Preqin surveyed expect to commit more to private debt over the next 12 months, with a further 40% maintaining investment levels.

• The number and value of private debt deals fell in 2020, but their average size increased from $70.9 million to $84.8 million, pushed higher by billion-dollar loans to troubled transportation firms Hertz and LATAM Airlines.