Private debt looks set to continue its journey into the mainstream as an asset class. Recent research reveals that assets under management (AUM) globally are expected to grow by 11% CAGR between now and 2025, to $1.46tn, and that nearly half of investors confirmed that they would be increasing their private debt allocation this year, compared to 2020.
To a large extent that rise in popularity has been fuelled by banks easing back on lending as a result of increasing regulations and consolidation within the industry – at a time when demand for financing, particularly among mid-caps and SMEs, has grown and showing little sign of waning. There is also the added backdrop of prevailing low interest rates and subdued default rates, making private debt an attractive alternative to the public markets.
That opportunity for private creditors to plug some of that funding gap left by banks however, has not been without its challenges, particularly over the past 18 months. The fundraising process became more protracted, with more time spent in market before reaching the finishing line, and the Covid pandemic has also seen many LPs take a more cautious approach by turning to more experienced managers, rather than smaller or newer players, resulting in larger AUM volumes being concentrated among fewer players.
What can managers learn from the past to better plan for the future?
We asked a panel of industry experts with different perspectives to take a reflective look at some of those challenges. In our latest whitepaper, The Factors Shaping the Private Debt Market, they discuss some of the strategies that proved most resilient during the recent past, as well as share opinions on what they see as the next wave of opportunities going forward.
Four key themes came out of those discussions in the report:
To find out how Apex Group can help you set up or manage your private debt fund, please contact us.
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