Measurement issues greater than ever in non-public credit score, based on PitchBook evaluation, as new information exhibits that the most important managers – and bigger funds – are capturing an growing share of the market.
The info supplier’s annual international non-public debt report revealed that the share of fundraising by rising managers, outlined as these with three or fewer funds, fell to only six per cent in 2024.
This compares to 10.1 per cent in 2023 and seven.6 per cent in 2022.
Issues round asset sourcing in a extremely aggressive surroundings and historic ranges of dry powder have benefitted bigger managers, PitchBook mentioned.
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“This favoured established platforms with broad sourcing capabilities amid persistent volatility,” the evaluation mentioned. “As well as, whereas non-public credit score yields stay enticing given the elevated base price, spreads compressed considerably in 2024 as lenders confronted a crowded taking part in discipline and elevated competitors from the broadly syndicated market.”
PitchBook’s information additionally confirmed that the variety of funds closed in 2024 fell year-on-year by greater than 50 per cent, whereas the median debt fund dimension practically doubled from ranges of the earlier 5 years, as investor demand for personal debt grew.
“The pattern towards bigger funds is evident in what has develop into a crowded taking part in discipline inside the asset class,” the report mentioned.
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“Greater than 80 per cent of funds closed in 2024 have been bigger than their predecessor funds, and capital raised by megafunds remained steady at $86.6bn (£66.6bn) in contrast with $87.3bn in 2023.”
General non-public debt fundraising is on observe to breach $200bn for the fifth consecutive yr in 2024, as soon as PitchBook incorporates information from late-reporting funds.
Non-public debt overtook enterprise capital for the second yr in a row because the second-largest technique in non-public capital markets, solely behind non-public fairness.
Rising inflows from insurance coverage firms and wealth administration channels have emerged as “vital new sources of capital” for personal debt, PitchBook mentioned.
Whereas decrease charges have prompted some traders to show away from floating-rate debt, PitchBook expects the non-public debt sector to proceed to develop attributable to ongoing structural shifts within the financing markets, together with the gaps created by the withdrawal of conventional financial institution lenders, sturdy demand for financing for mid-market firms, and firms staying non-public for longer.
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Direct lending recorded its biggest share of fundraising exercise ever inside non-public debt final yr, accounting for 60.7 per cent of capital raised. This far surpassed its five-year common share of 39.7 per cent.
The rising financing wants of non-investment-grade debtors and the enchantment of upper yields than these present in public market debt have bolstered investor demand for direct lending methods, PitchBook mentioned.
The 5 largest non-public debt funds closed in 2024 have been all direct lending funds, topped by ICG’s Senior Debt Companions V which closed final September with $17bn, beating its $11bn goal.