Preqin: Private Debt Industry AUM nearing $600B

Mar 15 2017 | 10:55pm ET

The fast-growing private debt industry reached a record $595 billion in AUM by the end of last year’s first half, according to the latest edition of Preqin’s Global Private Debt Report, while both dry powder and the total value of unrealized investments has increased despite record levels of capital distributed to private debt fund investors.

In fact, the 2017 edition of the report, released on Wednesday, predicts more than $100 billion was returned to investors in 2016. This level of capital returning to investors has spurred satisfaction in the asset class, and in turn may help private debt funds to record a landmark year in 2017. 

Key highlights from Preqin’s 2017 Global Private Debt Report

  • Industry AUM of $595bn as of the end of June 2016 was comprised of $224 billion in dry powder and
$371 billion in the unrealized value of invested assets. 

  • The industry has seen a decade of successive annual increases in AUM, and consequently the asset class has 
quadrupled in size since 2006. 

  • Distressed debt funds account for over a third (38%) of total industry assets, with direct lending (26%) and 
mezzanine (23%) funds comprising the bulk of remaining AUM. 

  • This growth comes despite record levels of capital being returned to investors. Distributions totaled $95 billion in 2015 and a further $58 billion in H1 2016. 

  • 68% of investors in the asset class hold a positive view of it, and only 4% say the reverse. 

  • 2016 marked another year of robust fundraising, with 131 vehicles raising a combined $93 billion, the third highest annual total of all time. 

“The private debt asset class continues to ride the crest of a wave which has brought substantial fundraising totals over the past two years, record distributions and overwhelming investor satisfaction,” said Ryan Flanders, head of private debt products for Preqin. “It is therefore of little surprise that the industry has seen yet further expansion with global assets under management on track for a tenth consecutive annual increase through 2016. 
Both dry powder and unrealized value are at all-time highs, a promising sign for the continued prosperity of the industry.” 

“However, private debt managers will be aware that growing dry powder may lead to material yield compression,” Flanders continued. “At the same time, banks continue to return to the marketplace in Europe and the easing of financial regulations under a Trump presidency may also endanger the growth of private credit in the U.S.” 

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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