Preqin: European Private Debt Fundraising Down Sharply in 2016 YTD

Nov 3 2016 | 8:07pm ET

The blistering pace of fundraising for private debt funds over the past several years may be slowing, according to recent data from Preqin showing a sharp fall in European private debt activity so far this year.

Alternative investment funds have secured $17 billion of investor capital in the year to date, significantly lower than the $33 billion raised in 2015, according to the latest edition of Preqin’s Private Debt Fundraising report. 

The European private debt industry has enjoyed five consecutive years of annual fundraising increases, starting with 2010’s $6 billion. However, at the current rate, the aggregate capital raised in 2016 will reach only half of the total seen last year, although the number of funds closed so far this year (28) is not far off 2015’s total of 37. 

Despite predictions that private debt activity in Europe would eventually match levels seen in North America, Preqin’s data shows 55 North America-focused funds have raised $27 billion so far this year – significantly outraising their European counterparts 

Direct lending continues to represent the largest sub-sector of the Europe-focused private debt market, but Preqin’s data reveals a notable downtick in the region so far this year; 11 direct lending funds have raised $6.3 billion, compared to 17 funds that raised $20 billion in 2015. 

Other Key Private Debt Fundraising Facts: 

  • Funds in Market by Strategy: In total, 74 Europe-focused private debt funds are currently on the road, seeking a combined $36bn. Direct lending funds account for the majority of funds in market (53%) and capital targeted (52%), with 39 funds seeking $19bn. 

  • Fundraising Momentum: The majority (58%) of Europe-focused private debt funds on the road have been marketing themselves for over a year. Under a fifth (17%) of vehicles focused on the region have come to market in the past six months, and a further quarter have been on the road for the past 7-12 months. 

  • Dry Powder: Europe-focused private debt funds hold $54bn in uncalled capital commitments as of October 2016. This total represents a decrease from the levels recorded at the end of both 2015 ($61bn) and 2014 ($55bn). 

  • Largest Fund Managers: Intermediate Capital is the largest Europe-based private debt fund manager both in terms of capital raised in the past 10 years ($18.7bn) and by estimated dry powder ($9.1bn). In Europe, six of the 10 largest firms by dry powder, and five of the top 10 firms by capital raised, are located in London. 

“The European private debt industry has enjoyed substantial fundraising success in recent years, with many countries within the region seeing heightened alternative lending activity in the last decade,” said Ryan Flanders, Preqin’s head of private debt products. “However, a notable decline in direct lending has contributed to a general slowdown in fundraising activity focused on Europe. It is unsurprising, given the intensely competitive fundraising landscape, that fund managers have to work harder and spend longer marketing their funds, and the downturn in fundraising may act as a sign of a changing environment.” 

“Following the recent regulatory and border currency changes in Europe, the coming years will be telling in measuring the impact on intercontinental private financing and the global debt market,” Flanders added. “However, for the time being, it seems Europe-focused private debt fundraising has a chance to finish off 2016 with strong figures, considering more than $36 billion is currently sought for opportunities in the region by funds in market.” 

Founded in 2003, Preqin is a leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. More than 40,000 professionals in 90 nations use the company’s products.  

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