Direct lending boom helps private debt smash new records

By Daniel Lanyon on Thursday 9 August 2018

Editor's PickAlternative Lending

Over the past decade the industry has tripled in size since 2007, with private debt assets having grown year-on-year in almost every year since 2000.

Direct lending boom helps private debt smash new records
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Private debt assets under management (AUM) have grown to $667bn as of the end of 2017, according to data from Preqin.

With the exception of mezzanine funds, all private debt fund categories have seen their assets under management balloon over this period, with direct lending seeing a notable increase of $47bn in assets under management – a huge annual growth rate of 30 per cent.

Over the past decade the wider private debt market has tripled in size, growing from $204bn as of the end of 2007, with private debt assets having grown year-on-year in almost every year since 2000 with more and entrants and larger deals also apparent.

Preqin says that overall the private debt industry has grown 13 per cent from December 2016, when private debt assets under management had yet to hit $600bn, to the end of 2017.

Within the new total (as at he the end of 2017) of $667bn, $246bn is in 'dry powder' i.e waiting to find a home and $421bn is in the unrealised value of invested assets.

While distressed debt accounts for the largest proportion (32 per cent) of total industry assets, direct lending is gtowing rapidly and is now 30 per cent of the mix. Mezzanine funds account for 22 per cent funds, more or less the bulk of remaining AUM.

Tom Carr, Head of Private Debt Products at Preqin says thehe growth in direct lending assets was a significant contributor to total industry growth and is the fastest-growing part of the industry.

"It is also significant that even well-established fund types have seen increases in recent years, illustrating how much private debt is a growing industry.It is particularly impressive that private debt assets have grown so much given that capital calls have seen year-on-year record highs from 2011 to 2017. Although the net flow of capital to investors was only $10bn, 2017 marks the first year in which distributions exceeded $100bn and is significantly beyond the level of capital returned in any previous year,” he said.

“Given its prodigious rate of growth, we may well see private debt assets approach three-quarters of a trillion dollars in the next year or so,” he added.

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