Private credit inflows outperform other alts
Private credit fundraising has remained resilient amid a muted backdrop for broader alternatives, new Moody’s research has found.
Analysis of six European alternative asset managers that the ratings agency monitors – Man Group, ICG, Tikehau, Patrizia, EQT and Partners Capital – showed that overall fundraising fell by 18 per cent year-on-year in the first half of 2024 to €26bn (£21.8bn) despite a gradually improving macroeconomic environment.
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Moody’s said the downturn reflects low exit volumes, which leaves funds locked up for longer, as well as lower demand for alternative investments because of improved interest rates on liquid assets.
However, while overall fundraising fell, inflows into private credit strategies increased by 72 per cent year-on-year to €8bn.
In contrast, private equity fundraising fell by 12 per cent to €11bn and real asset inflows fell by 53 per cent to €7bn.
The Moody’s report also showed that the six asset managers’ total assets under management (AUM) rose by five per cent in the first half of 2024, extending an unbroken run of annual growth since 2017.
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It said that this reflects an increase in valuations which lagged the public market rallies of the second half of 2023.
Private credit again outperformed other alternatives, with AUM growing by eight per cent in the first half of 2024.
Private equity AUM grew by seven per cent, while real asset AUM rose by one per cent, with infrastructure up by four per cent and real estate AUM remaining flat.
“The cohort’s AUM has more than doubled since 2018, and the European alternative asset sector now accounts for around 25 per cent of the global market,” Moody’s said.
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“Managers have taken strategic actions to position themselves for growth, but this will ultimately depend on their ability to exit portfolio positions in a timely manner and at attractive valuations, which will remain a headwind over the medium term. If investor capital remains locked up for lengthy periods, investor confidence will suffer, while managers who have found ways to return capital will benefit.
“Private markets are expanding globally, and alternative managers have emerged as leading players in credit and real assets. Investors, especially long-term players such as life insurers and pension funds, have become more willing to surrender liquidity for better returns.
“Alternatives also offer diversification benefits, low correlation with public markets and direct access to asset classes such as green infrastructure.”