Number of global private debt funds hits new record

After a year in the spotlight, asset class’s results were broadly positive

Number of global private debt funds hits new record

While private debt fundraising in 2023 will look relatively flat against 2022, it is still strong when compared to other private capital asset classes, according to the Preqin Global Report 2024: Private Debt.

Despite economic uncertainty within the market, there is now a record number of private debt funds, growing by 19% from 2022 to 1,080 at the end of Q3 2023, with over 40% increase in the capital being targeted by new funds. The ratio of capital targeted in 2023 to capital raised over the prior year has spiked to an all-time high of 3.0x, suggesting that fund managers are optimistic about the prospects for private debt. 

The data also shows that private debt investors are allocating capital to fewer, larger funds than previously. According to Preqin analysts, this suggests that investors value the economies of scale that accrue to larger funds.

“2023 was a year where private debt was under the spotlight, and the asset class’s results were broadly positive. Fundraising held up in difficult conditions, as LPs remained supportive of the asset class in the face of uncertain economic conditions. Our results suggest that GPs are also optimistic about growth in investor demand for 2024,” said RJ Joshua, VP, head of private equity, research insights, at Preqin.

In addition, Preqin analysts believe distressed debt could benefit from a weaker macroeconomic environment, as it may create investment opportunities for these funds, while business development corporations (BDCs) are an established route for funds to attract capital from smaller investors in the US.

Looking forward, Preqin analysts expect the fundraising environment to improve, as the rate situation becomes more embedded in markets, with fund managers and investors alike adjusting to higher interest rates. Preqin also forecasts that private debt AUM will grow at a compound annual growth rate (CAGR) of 11% from 2022 to 2028, reaching an all-time high of $2.8tn – almost doubling the 2022 figure of $1.5tn.