Investors continue to flock to private debt
September 30, 2023
Earlier this week, we released our semi-annual Global Private Debt Report, combining PitchBook insights with those from our colleagues at LCD into a single read.
LCD, of course, is the authority on all things leverage finance related—i.e., high-yield loans and bonds that go into the making of M&A and LBO deals—among other uses. PitchBook brings to the table its decades of tracking fundraising and fund performance in private debt and private assets more broadly.
The combined product packs a pretty good punch.
The Fed's decision to keep interest rates higher for longer is a reminder of private debt's appeal as floating rate loans continue to beat bonds and almost equal stocks in year-to-date returns.
Other key takeaways from this new report:
• Private debt fundraising has overtaken VC as is second only to PE among private market strategies. The $94.9 billion raised in H1 is ahead of last year and is tracking above $200 billion for the fourth consecutive year.
• Not included in that total is $16.6 billion in retail fundraising for non-traded BDCs, interval funds, and tender offer funds. These new structures have allowed private debt sponsors to gather an additional $200 billion in AUMs over the last three years. The total AUM in private debt exceeds $1.75 trillion.
• Following a stellar year in 2022 when private debt outperformed PE and all other private capital strategies with the exception of real estate and real assets, the year is off to a strong start with floating rate loans outperforming bonds by a wide margin. The Morningstar LSTA bellwether index is up 10.4% through September 22. That compares to +6.3% on high-yield bonds, the next best performer in the US fixed income.
Direct lending continues to be the preferred substrategy for investors in private debt funds, accounting for 32% of total capital raised in H1.
Mezzanine ranked second at 27.9% but is coming on fast, growing its share by 15.8 percentage points in the last year and contributing several of the largest funds. Special situation funds were a close third, demonstrating how fundraising has diversified.
In addition to sizing up the retail opportunity for private credit sponsors, the report shares LCD's intelligence on the battle for market share between non-bank lenders and the bank-led syndicated loan market. These are both fairly opaque areas where data is hard to come by and where PitchBook and LCD have combined to shine the light.
Download our free Global Private Debt Report.
LCD, of course, is the authority on all things leverage finance related—i.e., high-yield loans and bonds that go into the making of M&A and LBO deals—among other uses. PitchBook brings to the table its decades of tracking fundraising and fund performance in private debt and private assets more broadly.
The combined product packs a pretty good punch.
The Fed's decision to keep interest rates higher for longer is a reminder of private debt's appeal as floating rate loans continue to beat bonds and almost equal stocks in year-to-date returns.
Other key takeaways from this new report:
• Private debt fundraising has overtaken VC as is second only to PE among private market strategies. The $94.9 billion raised in H1 is ahead of last year and is tracking above $200 billion for the fourth consecutive year.
• Not included in that total is $16.6 billion in retail fundraising for non-traded BDCs, interval funds, and tender offer funds. These new structures have allowed private debt sponsors to gather an additional $200 billion in AUMs over the last three years. The total AUM in private debt exceeds $1.75 trillion.
• Following a stellar year in 2022 when private debt outperformed PE and all other private capital strategies with the exception of real estate and real assets, the year is off to a strong start with floating rate loans outperforming bonds by a wide margin. The Morningstar LSTA bellwether index is up 10.4% through September 22. That compares to +6.3% on high-yield bonds, the next best performer in the US fixed income.
Direct lending continues to be the preferred substrategy for investors in private debt funds, accounting for 32% of total capital raised in H1.
Mezzanine ranked second at 27.9% but is coming on fast, growing its share by 15.8 percentage points in the last year and contributing several of the largest funds. Special situation funds were a close third, demonstrating how fundraising has diversified.
In addition to sizing up the retail opportunity for private credit sponsors, the report shares LCD's intelligence on the battle for market share between non-bank lenders and the bank-led syndicated loan market. These are both fairly opaque areas where data is hard to come by and where PitchBook and LCD have combined to shine the light.
Download our free Global Private Debt Report.
Tim Clarke
Lead Analyst, Private Equity
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