Through the first half of this year private debt fundraising has been increasing at a very rapid rate. Recent reports and our conversations with executives of large lenders reveal over $70 billion has been raised already in 2021 and is ready to be deployed (loaned out). This is due to low interest rates, decreased default rates, and the desire by investors to see alternative investment vehicles, rather than equities, bonds, etc. Direct lending continues to be robust, and billions are available for loans to businesses.
It’s also interesting to note that many lending sources already have large amounts available for distressed debt and special situations funding. However, the deployment of this funding is lagging right now as right there are not a lot of good opportunities to deploy funds due to the lack of current financial distress in the market.
When the COVID pandemic hit, many private debt funds experienced their worst quarter in the last decade. However, many have rebounded with the U.S. economy coming back, improving liquid credit markets, and surprising maintaining lower default rates.
It is worth repeating that private debt fundraising for the first half of 2021 is reported to reach over $70 billion. There are over 80 funds actively raising funds and are currently on pace to raise more than average of the last five-years. If interest rates remain low, default activity does not suddenly rise, and investors continue to see debt investments as attractive, we will experience continued growth in private debt fundraising. This is good news to U.S. businesses who will find loans available to fund their capital expenditure and growth needs with low-cost debt.
How much funding is available? At year-end last year, there was $355.1 billion dollars in debt fund available to be loaned out. We forecast the total amount private debt funds available to reach $500 billion by year end.
