VOLUME 3, ISSUE 2 ■ FEBRUARY 2018 All data in this newsletter can be downloaded to Excel for free SIGN UP Sign up to Spotlight, our free monthly newsletter, providing insights into performance, investors, deals and fundraising, powered by Preqin data: Alt Credit Intelligence European and US fund Services Awards: Best Data and Information Provider | Africa Global Funds Awards 2016: Best Research and Data Provider | The Queen’s Award for Enterprise: International Trade | HedgeWeek Global Awards: Best Global Hedge Fund Research Provider | CAIA Corporate Recognition Award www.preqin.com/contact [email protected]| IN THIS ISSUE FEATURE 2017 Fundraising Market 2 FEATURE Investment Consultant Outlook for 2018 5 INDUSTRY NEWS 9 THE FACTS ■ How Investors Source and Select Funds ■ Largest Fund Managers ■ Fund Administrators ■ Fund Auditors 11 12 13 14 CONFERENCES 15 2017 FUNDRAISING MARKET Private debt funds secured a combined $107bn among 136 funds that reached a final close in 2017, setting a new all- time high for aggregate capital committed to the asset class, surpassing the $100bn record set in 2008 and repeated in 2015. Find out more on page 2 INVESTMENT CONSULTANT OUTLOOK FOR 2018 Sentiment with regards to private debt returns has been largely positive; 40% of surveyed consultants stated that private debt had exceeded their expectations over the past year, the largest proportion across all alternative asset classes. Find out more on page 5 JUST RELEASED: 2018 PREQIN GLOBAL PRIVATE DEBT REPORT 2018 PREQIN GLOBAL PRIVATE DEBT REPORT Order Your Copy Download Sample Pages PRIVATE DEBT SPOTLIGHT
Transcript
VOLUME 3, ISSUE 2 ■ FEBRUARY 2018
All data in this newsletter can be downloaded to Excelfor free
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fundraising, powered by Preqin data: Alt Credit Intelligence European and US fund Services Awards: Best Data and Information Provider | Africa Global Funds Awards 2016: Best Research and Data Provider | The Queen’s
Award for Enterprise: International Trade | HedgeWeek Global Awards: Best Global Hedge Fund Research Provider | CAIA Corporate Recognition Award
THE FACTS■ How Investors Source and Select Funds■ Largest Fund Managers■ Fund Administrators■ Fund Auditors
11
12
1314
CONFERENCES 15
2017 FUNDRAISING MARKETPrivate debt funds secured a combined $107bn among 136 funds that reached a final close in 2017, setting a new all-time high for aggregate capital committed to the asset class, surpassing the $100bn record set in 2008 and repeated in 2015.
Find out more on page 2
INVESTMENT CONSULTANT OUTLOOK FOR 2018
Sentiment with regards to private debt returns has been largely positive; 40% of surveyed consultants stated that private debt had exceeded their expectations over the past year, the largest proportion across all alternative asset classes.
Find out more on page 5
JUST RELEASED: 2018 PREQIN GLOBAL PRIVATE DEBT REPORT
Private debt funds secured a combined $107bn among 136 funds that reached
a final close in 2017, setting a new all-time high for aggregate capital committed to the asset class, surpassing the $100bn record set in 2008 and repeated in 2015 (Fig. 1). Investors are certainly seeing value in private debt investing throughout the capital stack, and that is being reflected in growing allocations to the asset class each year.
CAPITAL CONCENTRATIONThe 10 largest funds closed in 2017 secured 32% of all capital raised for the asset class – down from 45% in 2016; the remaining 68% was allocated to the other 126 funds. Average fund size has increased to $869mn, a leap of $171mn from the previous year. While the largest funds still control nearly a third of total capital raised in 2017, small and mid-sized private debt funds have seen fundraising success through strategy specialization and niche market access.
FUNDRAISING SUCCESS AND TIME ON THE ROADPrivate debt funds achieved final closures in 2017 faster than in any year since 2008. On average, funds that reached a final close in 2017 took 14 months to do so, surpassing fundraising targets
by 7% on average, whereas in 2016, funds took an average of 19 months to close and secured 105% of target (Fig. 2). These are encouraging signs for managers in the industry, particularly as concerns surrounding market crowding and potential investor hesitation began to creep into conversations in 2017. Furthermore, 45% of funds closed in 2017 reached their final close in less than 12 months (Fig. 3).
FUND TYPESDirect lending has continued to gain traction globally as a go-to allocation for
some of the largest institutional investors in 2017. The proportion of aggregate capital secured by direct lending funds closed in 2017 saw the largest growth among private debt strategies, more than doubling from 25% in 2016 to 51% in 2017 (Fig. 4).
Comparatively, the distressed debt fund market share dropped from 34% to 21% over the same time period, while the proportion of the fundraising market held by mezzanine funds also declined by more than two-thirds to 11%, compared with 33% in 2016.
2017 FUNDRAISING MARKETWe provide an overview of the record breaking private debt fundraising market in 2017, including breakdowns by region and strategy as well as time spent on the road.
45%
37%
18%
Less than 12 Months
12-23 Months
24-35 Months
36 Months or More
Source: Preqin Private Debt Online
Fig. 3: Average Time Spent in Market by Private Debt Funds Closed in 2017
14 15 1619 17 16 16 17 19
14
110%
84%92% 93% 98%
107%114% 113%
105% 107%
0%
20%
40%
60%
80%
100%
120%
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Time Spent in Market (Months)Average Proportion of Target Size Achieved
FUNDRAISING BY REGIONThe proportion of capital secured by private debt funds focused on Asia & Rest of World more than doubled in 2017 to reach 7%, up from 3% in 2016 (Fig. 5). The uptick in these regions reflects positively on the expansion of trusted private debt markets in countries such as China and India, as well as parts of Africa and South America.
North America-focused funds continued to account for the largest proportion of aggregate capital raised by funds closed in the year at 63%, while Europe-focused funds represented 31%. It is likely that both North America and Europe will persist as the main focus of private debt investors for the foreseeable future, as investors and managers continue to view these markets and legal infrastructures as presenting the best risk/return profiles.
FIRST-TIME FUNDRAISERS In 2017, first-time private debt fund managers accounted for a smaller proportion of aggregate capital raised than in any year on record, at just 7% ($7.8bn) of the total capital secured, two percentage points lower than in 2012 (Fig. 6). As the pool of established managers continues to expand each year, it is likely that the proportion of first-time fund capital may continue to decline, even with private debt activity picking up in less developed markets in the near future.
88%
47%
83%66%
55%72%
62% 56%70%
63%
8%
37%
12%
27%30%
25%32%
34%
27%31%
5%15%
4% 7% 15%3% 6% 9% 3% 7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
North America Europe Asia & Rest of WorldSource: Preqin Private Debt Online
Prop
ortio
n of
Agg
rega
te C
apita
l Rai
sed
Year of Final Close
Fig. 5: Proportion of Aggregate Capital Raised by Private Debt Funds by Primary Geographic Focus, 2008 - 2017
Fig. 6: Proportion of Aggregate Capital Raised by First-Time vs. Experienced Private Debt Fund Managers, 2008 - 2017
19%7%
18%9% 15%
28%42% 38%
25%
51%
45%
34%
56%
43%47%
34%
27% 29%
34%
21%
1%0.5%
1%1%
1%2%
1%28%
31%
21%
28%22% 26% 14% 24% 33% 11%
6%26%
4%18% 15% 10% 16% 7% 7%
13%
1% 0.5% 1% 2% 3% 2% 4%
0%10%20%30%40%50%60%70%80%90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Direct Lending Distressed Debt Fund of FundsMezzanine Special Situations Venture Debt
Source: Preqin Private Debt Online
Prop
ortio
n of
Agg
rega
te C
apita
l Ra
ised
Year of Final Close
Fig. 4: Proportion of Aggregate Capital Raised by Private Debt Funds by Fund Type, 2008 - 2017
AGGREGATE CAPITAL RAISED BY LARGEST FUNDS CLOSED, 2014 - 2017
2014 2015 2016 2017
Capital Raised by 10 Largest FundsCapital Raised by All Other Funds
40% 36% 45%32%
60% 64% 55%68%
PRIVATE DEBT FUNDRAISING MOMENTUM IN 2017 BY FUND TYPE
102%
16
Mez
zani
ne
117%
14
Dir
ect
Lend
ing
Average Time Spent in Market (Months)Average Proportion of Target Size Achieved
91%
14
Spec
ial
Situ
atio
ns
116%
Dis
tres
sed
Deb
t
15
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INVESTMENT CONSULTANT OUTLOOK FOR 2018
Private Debt Spotlight | February 20185
INVESTMENT CONSULTANT OUTLOOK FOR 2018Using data from our recent investment consultant survey, we analyze private debt investment consultants’ recommendations for 2018 by region, strategy and structure.
Investment consultants provide a range of services to investors, from sourcing funds
to conducting due diligence on behalf of their clients. They act as key intermediaries and gatekeepers between institutional investors and fund managers, offering mandates on both a discretionary and non-discretionary basis.
There are currently 547 alternative investment consultants globally. Of these, 41% provide private debt advisory services to their clients. In November 2017, Preqin conducted a survey of 36 consultants active in private debt to determine their sentiment with respect to the private debt industry, their regional, structural and strategic preferences for the coming year, as well as their views on the most important factors to consider when selecting private debt fund managers.
RECOMMENDED PORTFOLIO ALLOCATIONSentiment with regards to private debt returns has been largely positive in 2017. Fig. 1 shows that 40% of surveyed consultants stated that private debt had exceeded their expectations over the past year, the largest proportion across all alternative asset classes.
It is no surprise, therefore, that just over half (53%) of private debt investment consultants have stated they will be recommending their clients increase their allocations to the asset class in 2018 in comparison to 2017 (Fig. 2).
In terms of recommended allocations as a proportion of AUM, 46% of investment consultants favour a private debt portfolio allocation of 1-5% (Fig. 3). At the higher end of the spectrum, 8% of respondents recommend their clients allocate more
than 15% of AUM to the asset class, up significantly from the previous year’s survey when no consultants recommended their clients have an allocation in this range.
STRATEGY ALLOCATIONInvestment consultants were asked about the strategies that they will be recommending to their clients in 2018. Consistent with results seen over recent years, direct lending appears to be the preferred private debt fund type among respondents: 75% will advise their clients
53%
33%
14%
Increase Allocation
Maintain Allocation
Decrease Allocation
Source: Preqin Investment Consultant Survey, November 2017
Fig. 2: Investment Consultants’ Private Debt Allocation Recommendations for 2018 Compared with 2017
10% 8% 9%24%
14%29%
70%
46%
17%
57%
52%
24%
36%
10%
25%
31%
17%14%
24%
21%
10%13%
31%
13% 5%
10%
4%4%
4%
4% 5%
14%
11% 4%17% 14%
0%10%20%30%40%50%60%70%80%90%
100%
Priv
ate
Equi
ty
Vent
ure
Capi
tal
Priv
ate
Deb
t
Real
Est
ate
Infr
astr
uctu
re
Nat
ural
Reso
urce
s
Hed
ge F
unds
More than 20%
16-20%
11-15%
6-10%
1-5%
Less than 1%
Source: Preqin Investment Consultant Survey, November 2017
Prop
ortio
n of
Res
pond
ents
Fig. 3: Investment Consultants’ Recommended Allocations to Alternative Assets in 2018 (As a Proportion of AUM)
8% 14% 16% 16% 13%24%
60%54% 50% 44% 52%
74% 53%
20%
38% 36% 40% 32%13%
24% 20%
0%10%20%30%40%50%60%70%80%90%
100%
Priv
ate
Equi
ty
Vent
ure
Capi
tal
Priv
ate
Deb
t
Real
Est
ate
Infr
astr
uctu
re
Nat
ural
Reso
urce
s
Hed
ge F
unds
ExceededExpectations
MetExpectations
Fallen Short ofExpectations
Source: Preqin Investment Consultant Survey, November 2017
Prop
ortio
n of
Res
pond
ents
Fig. 1: Investment Consultant Views on the Performance of Alternative Assets in 2017 Relative to Expectations
INVESTMENT CONSULTANT OUTLOOK FOR 2018
Private Debt Spotlight | February 20186
invest either more or the same amount of capital over the coming year in comparison to 2017 (Fig. 4). A further 6% did not recommend the strategy in 2017 but will in 2018.
Private debt consultants also stated they will be advising their clients to direct more capital towards special situations (44%) and distressed debt (40%) strategies. Venture debt, however, is likely to feature less prominently in 2018, with 67% of respondents advising against the strategy in both 2017 and 2018.
REGIONAL ALLOCATIONFig. 5 shows that the more established private debt markets remain favoured among consultants. Despite the uncertainty surrounding Brexit, 47% of investment consultants will advise clients to increase their private debt allocations to Europe. North America-focused private debt funds also appear attractive among those surveyed, as consultants look to stick to more mature debt markets across the US.
Consultants continue to be wary of the developing private credit markets in the Middle East and Africa: 93% of respondents stated they will not advise their clients to direct capital towards these regions in 2018.
ROUTES TO MARKETOver a third (36%) of investment consultants will advise their clients to invest more capital via primary commitments in 2018 than in 2017, and a further 7% that did not recommend the structure in 2017 will do so in 2018 (Fig. 6). Consultants’ appetite for separate account mandates also appears to have held firm, with 29% of private debt consultants stating they will recommend their clients invest more capital via this route to market in 2018.
FUND SELECTIONWhen it comes to conducting due diligence on private debt managers, experience with the fund strategy appears to be the most significant factor among investment consultants, with all respondents citing this as very important (Fig. 7), an increase from 90% a year prior. A manager’s ability to demonstrate a strong performance history is naturally among the top factors to be considered: 93% of consultants consider a successful track record at the team level to
7%
7%
7%
14%
21%
29%
36%
36%
7%
43%
50%
72%
57%
14%
0% 20% 40% 60% 80% 100%
Fund of Funds
DirectInvestments
SeparateAccounts
PrimaryInvestments
Did Not Recommend in 2017, but WILL Recommend in 2018Invest More Capital than in 2017Invest the Same Amount of Capital as in 2017Invest Less Capital than in 2017Did Not Recommend in 2017, and WILL NOT Recommend in 2018
Source: Preqin Investment Consultant Survey, November 2017
Proportion of Respondents
Fig. 6: Investment Consultants’ Private Debt Recommendations for 2018 by Structure
6%
7%
6%
6%
6%
13%
24%
40%
44%
38%
24%
6%
17%
26%
25%
37%
6%
7%
29%
7%
19%
59%
67%
23%
27%
31%
0% 20% 40% 60% 80% 100%
Fund of Funds
Venture Debt
Mezzanine
Distressed Debt
Special Situations
Direct Lending
Did Not Recommend in 2017, but WILL Recommend in 2018Invest More Capital than in 2017Invest the Same Amount of Capital as in 2017Invest Less Capital than in 2017Did Not Recommend in 2017, and WILL NOT Recommend in 2018
Source: Preqin Investment Consultant Survey, November 2017
Proportion of Respondents
Fig. 4: Investment Consultants’ Private Debt Recommendations for 2018 by Strategy
7%7%
13%13%
20%40%
47%
7%
7%7%
20%13%
40%47%
7%
7%
93%93%
86%80%
60%67%
13%6%
0% 20% 40% 60% 80% 100%
AfricaMiddle East
Latin AmericaEmerging Markets
AsiaAustralasia
North AmericaEurope
Did Not Recommend in 2017, but WILL Recommend in 2018Invest More Capital than in 2017Invest the Same Amount of Capital as in 2017Invest Less Capital than in 2017Did Not Recommend in 2017, and WILL NOT Recommend in 2018
Source: Preqin Investment Consultant Survey, November 2017
Proportion of Respondents
Fig. 5: Investment Consultants’ Private Debt Recommendations for 2018 by Region
INVESTMENT CONSULTANT OUTLOOK FOR 2018
Private Debt Spotlight | February 20187
be very important, while slightly fewer (87%) consider track record to be very important at the firm level. Consultants recognize a sizeable GP commitment to a fund, attractive fund terms and a firm presence in the targeted private debt market with similar importance.
KEY ISSUESInvestment consultants were asked about the most important issues affecting the private debt market over the coming year. With 2017 seeing the first rate hikes in the past 10 years from both the Bank of England and the Federal Reserve, it is no surprise that interest rates appeared to be of greatest concern among respondents, with 74% citing this as a key issue (Fig. 8).
Sixty-eight percent of consultants believe private debt deal flow is a key issue for 2018, with governance remaining a notable issue for just over half of surveyed consultants (55%).
When asked about the biggest challenges affecting their business within the wider alternatives universe, as was the case one year ago, 60% of consultants cited identifying attractive investment opportunities as a challenge (Fig. 9). A competitive market appears to be at the forefront of consultants’ minds as they look to find new business: 40% of surveyed consultants said that competition with other consultants currently exists as a challenge in alternatives.
OUTLOOKOverall, the outlook for private debt in 2018 remains largely positive among consultants. Investment consultants appear confident that private debt will continue to provide their clients with strong returns and distributions over the coming year, and as a result, will be advising their clients to direct larger proportions of their AUM to the asset class.
Shifting legislation continues to present both challenges and opportunities for private debt managers and investors across many regions and sectors. In the wake of Brexit, rising interest rates and evolving regulatory environments, many investors will be leaning on the expertise of consultants in the coming year.
27%27%
33%33%33%
40%47%
67%67%67%
87%93%100%
33%40%
40%54%
60%47%
40%33%33%33%
13%7%
40%33%
27%13%
7%13%13%
0% 20% 40% 60% 80% 100%
Fund Pre-Seeded with AssetsFirm Presence in Fundraising Market
Firm Previous Fundraising SuccessSuccessful First CloseUnique Fund Strategy
Team Previous Fundraising SuccessReturning Investor Base
Firm Presence in Investment MarketAttractive Fund Terms/Fees
Sizeable GP Commitment to FundFirm-Level Performance Track Record
Team-Level Performance Track RecordExperience with Fund Strategy
Very Important Somewhat Important Not ImportantSource: Preqin Investment Consultant Survey, November 2017
Proportion of Respondents
Fig. 7: Investment Consultant Views on the Most Important Factors When Selecting Private Debt Managers
6%14%15%
21%22%22%
25%27%
33%40%42%
50%55%
68%74%
0% 20% 40% 60% 80%
Commodity PricingPerception of Industry by Public
Notable Investors Exiting the Asset ClassRegulation
Volatility/Uncertainty in Global MarketsExit Environment
Portfolio ManagementTransparency
FeesValuations
PerformanceAvailability/Pricing of Debt Financing
GovernanceDeal Flow
Interest Rates
Source: Preqin Investment Consultant Survey, November 2017
Proportion of Respondents
Fig. 8: Investment Consultant Views on the Key Issues for the Private Debt Market in 2018
13%
20%
23%
27%
33%
33%
40%
40%
60%
0% 20% 40% 60% 80%
Retaining Clients
Increased Demand from Investors forLiquidity
Increased Demand from Investors forSophisticated Products
Adapting to Regulatory Changes
Meeting Client Performance Expectations
Client Pressure on Fees
Attracting New Clients
Competition with Other Consultants
Identifying Attractive InvestmentOpportunities
Source: Preqin Investment Consultant Survey, November 2017Proportion of Respondents
Fig. 9: Investment Consultant Views on the Key Challenges Affecting Their Business in Relation to Activity in Alternative Assets
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Thirty-six private debt funds held a final close in Q4 2017, securing more than $35bn in capital commitments. Twenty of the funds that closed are direct lending vehicles, while six are mezzanine, four distressed debt and special situations, with three venture debt funds ending fundraising. The largest fund closed in Q4 2017 was ICG’s Senior Debt Partners III, a €4.2bn direct lending fund focused on providing senior secured loans to European mid-market corporate borrowers.
The fourth quarter of 2017 featured seven Europe-focused funds reaching a final close, with only one fund targeting Asia and Latin America each. There were two funds closed as diversified multi-regional, while the remaining 26 funds have a North America focus. The lone Asia-focused fund closed is the INR 1bn IFMR FImpact Term Microfinance Fund, which is the third debt fund raised by IFMR and is focused exclusively on India.
■ New York State Teacher’s Retirement System has made a $100mn commitment to ADV Opportunities Fund II, a special situations vehicle.
■ Banco BPM, the Italian bank with AUM of €166bn is considering investing in private debt funds in the next 12 months via its private equity allocation, with a preference for mezzanine funds.
■ Japanese asset manager HC Asset Management will be investing in private debt funds over the next 12 months, targeting senior debt direct lending vehicles globally on an opportunistic basis.
■ UK based Generation Asset Management is planning to expand its exposure to private debt, targeting CLO and equity funds, while seeking senior and distressed debt funds on an opportunistic basis.
■ The $3.3bn Switzerland-based Marcuard Family Office will be investing in private debt in the next 12 months, targeting direct lending and mezzanine opportunities with a focus on emerging markets. It will commit to existing managers in its portfolio as well as managers it has not previously worked with.
■ Iowa Public Employees’ Retirement System (IPERS) will be committing $300mn to existing private debt managers in its portfolio over the next 12 months.
■ Liechtenstein-based Hilti Pension Fund will be investing in private debt on a global scale in 2018, seeking CLO and investment grade credit funds.
■ Municipal Employees’ Annuity & Benefit Fund of Chicago ($4.3bn in AUM) has issued an RFP for an investment consultant. The fund has previously invested in direct lending, distressed debt, mezzanine, real estate debt and special situation vehicles, with a typical investment size between $50mn and $100mn.
INDUSTRY NEWS
RECENTLY CLOSED FUNDS KEY FACTS
$2.2bnFinal close size of KKR Private Credit Opportunities Partners II, the largest fund to close so far in 2018 (as at 26 January 2018).
$68bnAggregate capital sought by direct lending funds in market globally, the most of any private debt strategy.
$35bnTotal private debt capital raised in Q4 2017 across 36 funds.
72%of private debt funds closed in Q4 2017 are targeting North America as a main investment focus.
In this month’s industry news we take a look at recently closed private debt funds and the latest investor news.
Do you have any news you would like to share with the readers of Spotlight? Perhaps you’re about to launch a new fund, have implemented a new investment strategy, or are considering investments beyond your usual geographic focus?
Send your updates to [email protected] and we will endeavour to publish them in the next issue.
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PRIVATE EQUITY* HEDGE FUNDS REAL ESTATE INFRASTRUCTURE PRIVATE DEBT NATURAL
RESOURCES
INVESTORCOVERAGE
6,968Active
Private Equity LPs
5,297Active
Hedge Fund Investors
6,178Active
Real Estate LPs
3,293Active
InfrastructureLPs
3,174Active
Private Debt Investors
3,189Active
Natural Resources Investors
FUNDCOVERAGE
18,979Private Equity
Funds
25,485Hedge Funds
6,957PE Real Estate
Funds
1,266Infrastructure
Funds
2,490Private Debt
Funds
1,939Natural Resources
Funds
FIRMCOVERAGE
13,068Private Equity Firms
9,372Hedge Fund
Firms
4,628PE Real Estate
Firms
541Infrastructure
Firms
1,589Private Debt
Firms
1,034Natural Resources
Firms
PERFORMANCECOVERAGE
6,058Private Equity
Funds
18,056Hedge Funds
1,797PE Real
Estate Funds
261Infrastructure
Funds
858Private Debt
Funds
549Natural Resources
Funds
FUNDRAISINGCOVERAGE
2,398Private Equity
Funds
16,002Hedge Funds
1,214PE Real
Estate Funds
171Infrastructure
Funds
337Private Debt
Funds
255Natural Resources
Funds
Alternatives Investment Consultants Coverage:
551Consultants Tracked
Funds Terms Coverage: Analysis Based on Data for Around
17,284Funds
Best Contacts: Carefully Selected from our Database of over
443,676Contacts
2015 Annual CAIA CorporateRecognition Award Winner
As at 30th January 2018
ALTERNATIVES COVERAGE
FIRMS FUNDS FUNDS OPEN TO INVESTMENT
INVESTORSMONITORED
FUNDS WITH PERFORMANCE DEALS & EXITS
30,232 52,888 19,617 15,642 27,321 321,703
DEALS & EXITSCOVERAGE
BUYOUT VENTURE CAPITAL REAL ESTATE INFRASTRUCTURE PRIVATE DEBT
HOW INVESTORS SOURCE AND SELECT FUNDSIn our December 2017 interviews with institutional investors, 28% revealed that they found it more difficult to identify attractive private debt fund opportunities in 2017 than in 2016. With this in mind, we examine in more detail the processes that investors use to source and screen funds based on data from Preqin’s platform and survey of 82 private debt investors conducted in December 2017.
KEY STATS: AVERAGE SCREENING PROCESS FOR PRIVATE DEBT FUNDS
MARKETING MATERIALS FAIL TO MEET THE NEEDS OF 36% OF INVESTORS – WHY?
Insufficient information on track record
Insufficient information on investment strategy
Insufficient information on fees/fund terms
Past performance data not following appropriate reporting guidelines
Insufficient information on team
46%
46%
29%
23%
17%
335Private Debt
Funds in Market
Investors Screen
240Private Debt Funds
Each Year
Less than
15of These Funds Reach Second-
RoundScreening
Investors Commit to
1-4Funds Each
Year
METHODS USED BY INVESTORS TO SOURCE FUNDS: ■ Through internal investment team (23%) ■ Mainly internal or consultant
recommendations, some external approaches (15%)
■ Mix of internal and external recommendations (43%)
Fig. 1: Leading Private Debt Fund Administrators, Funds Closed All-Time & Currently Raising
Firm Headquarters No. of Known PD Funds Sample Assignments
SS&C GlobeOp Windsor, US 84 OSP Value Fund II (Distressed Debt, $600mn); Innovatus Flagship Fund I (Direct Lending, $750mn*)
State Street Boston, US 52 Carlyle Strategic Partners IV (Distressed Debt, $2.5bn); European Middle Market Private Debt Fund (Direct Lending, €750mn*)
Citco Fund Services New York, US 44 Benefit Street Partners Special Situations Fund (Distressed Debt, $750mn); Crayhill Principal Strategies Fund (Special Situations, $700mn*)
SEI Investments Oaks, US 37 CapitalSpring Investment Partners V (Direct Lending, $725mn); Crestline Opportunity Fund III (Special Situations, $1.3bn)
JP Morgan Fund Services New York, US 32 Cerberus Institutional Partners VI (Distressed Debt, $4bn); Pemberton UK Mid-Market Direct Lending Fund (Direct Lending, £500mn*)
U.S. Bancorp Fund Services Milwaukee, US 28 THL Credit Direct Lending Fund III (Direct Lending, $511mn); Capitala Private Credit Fund V (Direct Lending, $350mn*)
Northern Trust Fund Administration Chicago, US 25 VPC Specialty Finance Fund II (Direct Lending, $500mn*); RPK Capital Aviation Investment Fund I (Special Situations, $300mn*)
PEF Services West Orange, US 18 Enlightenment Capital Solutions Fund II (Direct Lending, $147mn); Pelham S2K SBIC (Mezzanine, $105mn*)
BNY Mellon New York, US 14 TGAM Churchill Middle Market Senior Loan Fund (Direct Lending, $1.1bn); Izurium European Credit Fund (Direct Lending, €150mn)
Gen II Fund Services, LLC New York, US 14 Solace Capital Partners Fund (Special Situations, $576mn); VSS Structured Capital III (Mezzanine, $300mn*)
Fig. 1: Leading Private Debt Fund Auditors, Funds Closed All-Time & Currently Raising
Firm Headquarters No. of Known PD Funds Sample Assignments
PricewaterhouseCoopers London, UK 244 Permira Credit Solutions Fund III (Direct Lending, €1.7bn); Cerberus Institutional Partners VI (Distressed Debt, $4bn)
EY London, UK 181 Carlyle Strategic Partners IV (Distressed Debt, $2.5bn); OSP Fixed Income Impact Fund (Direct Lending, $500mn*)
KPMG Amsterdam, Netherlands 178 Varde Fund XII (Distressed Debt, $1.7bn); Idinvest Private Debt IV (Direct
Lending, €700mn*)
Deloitte New York, US 127 Riverside Strategic Capital Fund I (Direct Lending, $418mn); European Middle Market Private Debt Fund (Direct Lending, €750mn*)
RSM Chicago, US 83 GCG Investors IV (Mezzanine, $275mn); Medley Opportunity Fund III (Direct Lending, $800mn*)
Grant Thornton Chicago, US 32 PA Direct Credit Opportunities Fund II (Mezzanine, $740mn); European Distressed Fund III (Distressed Debt, €500mn*)
BDO London, UK 24 Prospect Credit Strategies Fund (Direct Lending, $1bn*); Brevet Direct Lending - Intermediate Duration Fund (Direct Lending, $500mn*)
EisnerAmper New York, US 24 AMERRA Agri Fund III (Direct Lending, $820mn); Sandton Credit Solutions Fund IV (Special Situations, $600mn)
CohnReznick New York, US 15 Ironwood Mezzanine Fund IV (Mezzanine, $400mn*); Closed Loop Fund (Direct Lending, $150mn*)
Crowe Horwath New York, US 14 H.I.G. Bayside Loan Opportunity Fund IV (Distressed Debt, $1.1bn); Peninsula Fund VI (Mezzanine, $402mn)
Deloitte EY KPMG PricewaterhouseCoopersSource: Preqin Private Debt Online
Proportion of Funds Using Big Four Auditor
Fig. 2: Market Share of Big Four Fund Auditors Servicing Private Debt Funds by Fund Size, Funds Closed in 2016-2017
17%
8%
10%
17%
15%
25%
42%
31%
16%
8%
44%
18%
0% 20% 40% 60% 80% 100%
Asia & Rest of World
Europe
North America
Deloitte EY KPMG PricewaterhouseCoopersSource: Preqin Private Debt Online
Proportion of Funds Using Big Four Auditor
Fig. 3: Market Share of Big Four Fund Auditors Servicing Private Debt Funds by Fund Manager Location, Funds Closed in 2016-2017
We examine the leading fund auditors in the private debt industry, including the market share of the Big Four auditors by fund size and fund manager location.
Given the potential of the European market, IMN’s 5th Annual Investors’ Conference on European CLOs & Leveraged Loans is extremely valuable as it brings together leading European CLO managers, regulators, and CLO investors to discuss key developments and investment opportunities in the industry.
5th ANNUAL INVESTORS’ CONFERENCE ON EUROPEAN CLOs & LEVERAGED LOANS
225+ CLO MANAGERS & INVESTORS ALREADY CONFIRMED!
Lead Sponsor: Patron Sponsor:
Associate Sponsors: Exhibitor Sponsor:
www.imn.org/europeclo: For sponsorship information, contact Chris Keeping at +1 212-901-0533 or [email protected]
11 April 2018 | London, UK
The 5th Annual
INVESTORS’ CONFERENCE ON EUROPEAN CLOs AND LEVERAGED LOANS
The programme will feature extensive coverage on outlook for issuance in 2018, structural and legal considerations, relative value from a research analyst and investor perspective, ratings methodology for CLOs, and more. Given the potential of the European market, this event is extremely valuable as it brings together leading European CLO managers, regulators, and CLO investors to discuss key developments and investment opportunities in the industry.
