Largest managers and funds increasingly dominate private credit
Size matters more than ever in private credit, according to PitchBook analysis, as new data shows that the largest managers – and larger funds – are capturing an increasing share of the market.
The data provider’s annual global private debt report revealed that the share of fundraising by emerging managers, defined as those with three or fewer funds, fell to just six per cent in 2024.
This compares to 10.1 per cent in 2023 and 7.6 per cent in 2022.
Concerns around asset sourcing in a highly competitive environment and historic levels of dry powder have benefitted larger managers, PitchBook said.
Read more: Trouble bubbling for private credit managers after so-called “golden age”
“This favoured established platforms with broad sourcing capabilities amid persistent volatility,” the analysis said. “In addition, while private credit yields remain attractive given the elevated base rate, spreads compressed significantly in 2024 as lenders faced a crowded playing field and increased competition from the broadly syndicated market.”
PitchBook’s data also showed that the number of funds closed in 2024 fell year-on-year by more than 50 per cent, while the median debt fund size nearly doubled from levels of the previous five years, as investor demand for private debt grew.
“The trend toward larger funds is clear in what has become a crowded playing field within the asset class,” the report said.
Read more: Analyst forecasts 13.6pc gross leveraged returns from private credit
“More than 80 per cent of funds closed in 2024 were larger than their predecessor funds, and capital raised by megafunds remained stable at $86.6bn (£66.6bn) compared with $87.3bn in 2023.”
Overall private debt fundraising is on track to breach $200bn for the fifth consecutive year in 2024, once PitchBook incorporates data from late-reporting funds.
Private debt overtook venture capital for the second year in a row as the second-largest strategy in private capital markets, only behind private equity.
Increasing inflows from insurance companies and wealth management channels have emerged as “important new sources of capital” for private debt, PitchBook said.
While lower rates have prompted some investors to turn away from floating-rate debt, PitchBook expects the private debt sector to continue to grow due to ongoing structural shifts in the financing markets, including the gaps created by the withdrawal of traditional bank lenders, robust demand for financing for mid-market companies, and companies staying private for longer.
Read more: Private debt and growth equity to drive private markets fundraising in 2025
Direct lending recorded its greatest share of fundraising activity ever within private debt last year, accounting for 60.7 per cent of capital raised. This far surpassed its five-year average share of 39.7 per cent.
The rising financing needs of non-investment-grade borrowers and the appeal of higher yields than those found in public market debt have bolstered investor demand for direct lending strategies, PitchBook said.
The five largest private debt funds closed in 2024 were all direct lending funds, topped by ICG’s Senior Debt Partners V which closed last September with $17bn, beating its $11bn target.
