Following a decade-long uptick, direct lending continues to riseFebruary 11, 2020 View comment (1)
Today, direct lending accounts for over half of all private debt fundraising, according to PitchBook's H2 2019 Global Private Debt Report. As a sub-strategy, direct lending funds raised $71.6 billion in 2019, amounting to 57% of all private debt fundraising. That record-breaking figure was raised across just 32 direct lending vehicles—the lowest fund count since 2012. Average fund sizes have grown much larger over the last three years, with direct lenders amassing $185.7 billion since 2017, and annual fund count continues to decrease.
Some direct lenders depend entirely on PE sponsors for deal flow. That spurs concerns that lenders will be too lenient on deal opportunities, with bad deals being financed to avoid burning bridges with PEGs and future lending opportunities.
A separate concern is the surplus of dry powder. Private debt as an asset class topped $241 billion of dry powder last year, according to PitchBook data, and will likely keep increasing as time goes on.
Managers generally don't appear to be struggling to put capital to work. They at least don't look as desperate as some suspect.
This column originally appeared in The Lead Left.
Featured image via Winslow Productions/Getty Images
Read more about private debt in our H2 2019 Global Private Debt Report.
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