Takeaways from the H1 2022 Global Private Debt Report | PitchBook
- Direct lending continues to be the standout strategy, accounting for more than a third of capital raised in the first half of the year, b
- If real yields rise back to long-term averages, LPs will be more incentivized to maintain allocations to more-liquid credit investments.
- North American-headquartered funds have accounted for 88.4% of capital raised thus far in 2022. European-headquartered funds raised a record $69.8 billion in 2021—representing 31.4% of capital raised globally—though have started more slowly this year. Asian-headquartered funds raised more than $6 billion in each of the last three years but still account for less than 5% of capital raised over that time.
- Most capital and most funds are in the North America (60%, 30% EU)
- 50% of funds are small (<250M)
- Majority of capital 60% sits in funds between $1-5B
- Over 150B in dry powder on hand each year for the last 5 years
- Direct lending tends to benefit from rate hikes, as they often use floating-rate instruments. However, with inflation at 40-year highs, real-returns from interest payments will be reduced.
- Given the limited upside—and hopefully limited downside—of private debt due to the return of capital plus interest characteristics that provide few opportunities for outsize returns, private debt will generally lag when equities are rising dramatically.