Private debt market to grow to $2.8trn as number of funds hits record high
The number of global private debt funds has reached a record high, with the market forecast to grow to $2.8trn (£2.2trn) by 2028.
A report from alternative assets data firm Preqin showed that the number of funds grew by 19 per cent from 2022 to 1,080 at the end of the third quarter of 2023, with a more than 40 per cent increase in the capital being targeted by new funds.
While private debt fundraising in 2023 will look relatively flat against 2022, Preqin analysts expect the fundraising environment to improve, as fund manager and investors adjust to higher interest rates.
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Preqin forecasts that private debt assets under management will grow at a compound annual growth rate (CAGR) of 11 per cent from 2022 to 2028, reaching an all-time high of $2.8trn – almost doubling the 2022 figure of $1.5trn.
The Preqin Global Report 2024: Private Debt also showed that the largest private debt funds are dominating the market.
The top 10 funds took over half of funds raised during the year-to-date to the third quarter, Preqin data found.
According to Preqin analysts, this suggests that investors value the economies of scale that accrue to larger funds, and are looking for experienced managers with a track record.
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“2023 was a year where private debt was under the spotlight, and the asset class’s results were broadly positive,” said RJ Joshua, VP, head of private equity, research insights, at Preqin.
“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.”
The Preqin report also predicted that distressed debt and mezzanine strategies will grow in popularity next year.
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