Fundraising | Strategy Review | Geography

FUNDRAISING
REPORT 2018
Private Debt Investor's interactive and downloadable review
of the 2018 fundraising environment

Andy Thomson Daniel Humphrey Rodriguez Andrew Woodman

Private Debt Investor Head of Fund Manager Research Special Projects Editor
andy.t@peimedia.com daniel.r@peimedia.com andrew.woodman@peimedia.com

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Fundraising
overview Year-on-year fundraising

Private debt fundraising continues to be dominated 220 275

by fewer, larger funds. This trend, a long-standing
200 250
feature of traditional private equity, is a possible sign
of maturity in the asset class. The numbers this year 180 225

are stark: just 154 funds reached a final close, the 160 200
lowest we have seen on record. However, this may
140 175
increase over the coming months as more

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information on funds closing towards the end of 120 150

2018 comes to light. 100 125

The fall in capital raised is large when compared with 80 100

the blockbuster year that was 2017. On the other
60 75
hand, that year’s total was somewhat distorted by the
$25 billion raised by Apollo Investment Fund IX. 40 50

Putting aside 2017, fundraising for the market has 20 25

maintained some stability. The drop in activity is also
0 133.05 132.95 149.59 147.53 211.34 134.90 0
a likely sign that the market is self-regulating. With so 2013 2014 2015 2016 2017 2018
much capital going in to the private debt space,
Capital raised ($bn) No. of funds
investors could be pre-empting a potential
downturn.
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>
Fundraising
overview Year-on-year fundraising by strategy

Distressed debt fundraising saw the sharpest

70
drop when compared with last year. A lot of
capital has been focused on this strategy as
60
investors have sought to capitalise on
upcoming distressed opportunities. With 50
many of those opportunities failing to

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materialise throughout 2018, however, the 40
market has become saturated. It could be that
investors are waiting for the already large 30
amount of dry powder to be deployed before
putting more capital to work. 20

10

$134.9bn 153 0
Raised by private Final closes of 2012 2013 2014 2015 2016 2017 2018
debt funds in 2018 private debt
funds in 2018 Subordinated / mezzanine debt Senior debt Distressed CLO Other

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>>
Fundraising
overview
2018 fundraising strategy breakdown

$134.9bn raised 38% 35% 17% 6%

153 funds closed 36% 33% 14% 11%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Subordinated / mezzanine debt Senior debt Distressed CLO Fund of funds Venture debt Royalties

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>>>
Fundraising
overview Largest fund closes, 2018

More than a third of the $134.9 billion total GS Mezzanine Partners VII GSO Capital Solutions Fund Kayne CVI Credit Ares Senior
$9.90bn III Senior Value Fund Direct
($46.4 billion) was raised by the 10 largest Credit Fund IV Lending
$7.12bn
private debt funds closing in 2018. Four of III $3.00bn Fund
these, including the largest (Goldman Sachs' $3.00bn $3.00bn
Mezzanine Partners VII), have a multi-regional
strategy. Europe-focused funds in the top 10
raised a collective $15.24 billion. Somewhat
surprisingly, North America-focused funds
comprised the smallest contingent within the Strategic Value Special Golub
Ares Capital Europe IV ICG Europe Fund VII Situations Fund IV Capital
top 10, raising a combined $8.32 billion. $7.45bn $5.15bn $2.85bn Partners 11
$2.32bn

EQT Mid-Market Credit II

$2.63bn

Multi-regional North America Europe

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Geography Regional focus of capital raised in 2018

Proportions of capital earmarked for each

region have remained at similar levels
throughout 2018, highlighting the maturity
of the market even further. Emerging
economies remain a small portion of the
global private debt landscape. While there Europe
$39.23bn
has been much talk of untapped
North
opportunities and future growth in these America
$48.49bn
markets, especially in Asia, it is yet to
become reality. The lack of growth is likely Asia-
Pacific
down to funds focused on emerging markets MENA
$5.33bn
$0.1bn
not generating the risk-adjusted returns
investors have come to expect, prompting
them to move to safer havens in developed
Multi-
economies. regional
Latin
America
$41.45bn $0.3bn

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>
Geography
Regional focus of capital raised

100
Almost 30 percent of private debt capital 5% 6%
90
raised in 2018 had a sole focus on the
European market. This is the first 80

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19% 20%
proportionate increase in fundraising for the 70 24%
26% 24% 29%
region since the 2014 peak – when Europe 31%
took a 31 percent share of the amount 60

raised. This contrasts with the amount of 50

31%
capital raised for multi-regional funds, which 26%
40 31% 38%
proportionately dropped from 40 percent of
36% 36%
the 2017 total to 31 percent of the 2018 30
41%
total. Funds targeting multiple regions tend 20
to be larger and more cyclical, affecting a
trend filled with peaks and troughs. 10

0 41% 46% 25% 33% 40% 40% 31%

2012 2013 2014 2015 2016 2017 2018

Multi-regional North America Europe Asia-Pacific Rest of the World

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Region review:
Europe Europe-focused fundraising
45 70

Despite the large 2018 drop in private debt

40 62
fundraising globally as compared with 2017,
capital raised for Europe has remained at similar
35 54
levels to last year (around $40 billion). Again,
the number of funds closed highlights the 30 47
consolidation trend, with more and more funds
closing up to the 2015 peak (70) and 25 39

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decreasing since then.

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20 31

15 23

10 16

5 8

0 6.32 7.00 6.33 8.43 25.80 25.24 41.42 35.81 36.12 41.55 39.23 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Capital raised ($bn) Number of funds closed

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>
Region review:
Europe Top 10 Europe-focused funds, 2012-18

In total, $245.2 billion was raised by funds with Intermediate Capital Group 28.11
a sole focus on European private debt between
Ares Management 18.52
2012 and 2018. Just 10 firms have collected 41
percent of this total. Ares management was the Hayfin Capital Management 8.98
largest non-European firm in this context,
raising $18.5 billion for European private debt – AXA Investment Managers - Real Assets 8.70

a large tranche of this collected during the BlueBay Asset Management 7.82
raising of the largest Europe-focused fund
closed during that time: Ares Capital Europe IV, EQT 6.95

which closed at $7.45 billion in July 2018.

The Carlyle Group 5.54

Avenue Capital Group 5.42

Alcentra 5.28

Apollo Global Management 4.93

0 5 10 15 20 25 30 35
Capital targeted ($bn)

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Funds in market, $234bn 549
1 Jan 2019 Sought for
funds in market
Total number of
funds in market

Largest funds in market as of 1 Jan 2019

Fund Name Fund Manager Target Region

Size ($bn) Focus
3G Special Situations 3G Capital 10.00 North
Fund V America Europe
$51.64bn
Lone Star Fund XI Lone Star Funds 7.50 Multi- North
regional America
$105.65bn
TPG Sixth Street Adjacent North Asia
Opportunities TPG 5.50 America
$18.87bn
Partners
MENA
EIG Energy Fund XVII EIG Global 5.00 Multi- $0.20bn
Energy Partners regional
GSO Energy Select Blackstone 5.00 Multi-
Opportunities Fund II regional Multi- Latin
Regional Sub-
America Saharan
$56.33bn $1.49bn Africa
$0.70bn

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How can we help? Other questions
to which we also
provided solutions:
How can PDI’s Research and Analytics team help you?
“How has the real
Sample client case study estate debt market
“Can you give me a developed over the
We compiled data on real assets debt fundraising over the past 10 years for a
list of LPs that have past 10 years? Are you
manager looking to raise a fund. With fundraising for this segment of the market
dwindling, we also compiled a list of LPs active in the real assets debt space for the committed to able to pinpoint the
management firm in question. European funds in key players?”
the past five years?
Please get in touch with us if you would like to see a sample of this data.

PDI’s Research and Analytics team is made up of researchers and analysts in

London, New York and Hong Kong, working on a 24/5 cycle to perform bespoke
research requests for you. We track the investment appetite and contact details of
LPs and GPs within our fundraising data platform, to help bring together fund
“How many Europe-
investors and managers with matching interests. focused funds are in
market at the
Platinum subscribers should email daniel.r@peimedia.com for more information
moment? Please
on the research services available. share a list of key
contacts at these
firms.”

For more information on becoming a Platinum level subscriber please contact:

Daniele Lorusso in London

on +44 (0) 207 566 5432
or daniele.l@peimedia.com