According to surveys conducted for Prequin’s 2015 Quarterly Report released in March, institutional investors in private debt are optimistic about developments on multiple fronts for the coming year:
There is strong and growing interest in private debt investment. 57% of respondents expecting to increase their allocation to private debt funds within the next 12 months (Fig. 1). An even larger proportion (65%) expects to increase their allocation to private debt in the longer term, while only 8% expect to decrease their exposure.
Nearly half of all commitments for 2015 are expected to have been made by end of Q2. 44% of respondents plan to make their next commitment in the first half of the year, with 20% anticipating making a commitment during the second half of 2015, as shown in Fig. 2. Only 11% of respondents do not anticipate investing in private debt during 2015, with the remaining 25% unsure of commitment plans.
Investors are becoming more experienced with sub-strategies in the private debt asset class. 62% of respondents view direct lending as the most promising type, an unsurprising conclusion after fundraising success within the strategy in 2014. Furthermore, half of respondents identified special situations as presenting strong opportunities, followed by distressed debt (30%) and mezzanine (28%). As shown in Fig. 4, Europe is currently viewed as presenting the most favourable investment opportunities for 69%