Private debt fund managers expect to see an increase in dealmaking and fundraising activity in 2024, as banks continue to hold back funding.
According to a new survey of 100 private debt funds by Alvarez & Marsal’s debt advisory group, the sector has a positive outlook on the year ahead, with more money expected to flow into the private debt market, and more money being deployed.
The firm noted that private credit funds are likely to continue to take market share from banks this year, and will also benefit from an uptick in merger and acquisition activity in 2024. Furthermore, the institutional investor appetite for private credit funds is expected to continue, as the higher rate environment leads to higher loan returns.
The survey found that market liquidity is likely to be boosted by the growth of the private credit sector, while pricing and leverage levels are expected to remain stable.
“When considered relative to the deal activity and fundraising scores, the strengthening liquidity levels can be viewed more as a result of increased fund power from established players ahead of an increased number of new entrants in the market,” said Tim Metzgen, managing director and EMEA head of debt advisory at Alvarez & Marsal.
“Private debt funds anticipate limited pressure on terms amid increased dealmaking, fundraising and liquidity.
“This implies that lenders are expecting that a higher number of deals in 2024 will allow them to deploy additional capital without the need to compete on terms. It also suggests limited concerns on macroeconomic conditions.”
Overall, Alvarez & Marsal’s survey found that private debt fund managers are positive about the market’s outlook in 2024, with growth predicted across every channel.
Read more: Mezzanine debt set to grow in 2024