Fewer managers collecting more of the capital

Private credit vehicles seeking capital fell from the record level reached in the first half of 2017.

The number of private debt funds raising money has fallen slightly from a record number at the middle of last year but it remains strong; as of 31 March, there were 497 funds in market compared to the 528 vehicles seeking capital as of 30 June, according to PDI data.

The change, while only 31 funds, is an almost 6 percent drop, and it may not be that surprising as we get later into the cycle. One of the biggest challenges may be gaining a foothold in the market for new firms, even if they are led by veterans of the alternative lending industry, the vaunted “barrier to entry” managers consistently mention.

What’s more, a source from a respected limited partner noted the daily unsolicited pitches about private debt funds has dropped recently, to only a couple a week. While multiple proposals a week still more than guarantees investors enough manager selection to sort through, the pickings seem to be getting slimmer.

The notion also holds when you undertake a year-on-year comparison for the first quarter’s fundraising totals. For the three months ending 31 March, managers raised $37.13 billion, a decrease of almost one-quarter from $48.73 billion during the same time last year. As this decline occurred, the average fund size markedly increased from $689.56 million in 2016 to $1.11 billion in 2017. It seems fewer managers are raising more money.