Preqin: High Valuations Are Top Concern For Private Debt Managers

Mar 15 2018 | 12:09pm ET

Almost half of private debt investors cite valuations at the top of the list of challenges facing the industry, while 70% believe there is more competition for deal-making opportunities.

However, over three-quarters of fund managers find that investor appetite for private debt has increased over the past year, according to a Preqin survey of 94 private debt fund managers in November 2017.

Key Private Debt Fund Manager Outlook Facts:

  • Almost half (49%) of private debt fund managers cite valuations as the key challenge facing the industry in 2018, with a further 37% citing deal flow as a major concern. 
  • Forty-five percent of fund managers feel that finding attractive investment opportunities has become more difficult compared to 12 months ago, while just 3% feel that it has become easier.
  • Competition for private debt transactions has also accelerated: 70% of managers report increased competition for transactions over the past year, an increase from 55% that said the same in November 2016.
  • Half of survey respondents are reviewing more opportunities now than 12 months ago, and 37% are reviewing the same number.
  • As a result, 77% of private debt managers plan to deploy more capital in 2018 than they did in 2017.
  • The vast majority (83%) of private debt fund managers also feel that competition for investor capital has increased compared to 12 months ago, while none report a decrease in competition. 
  • However, over three-quarters (76%) of fund managers have seen an increase in investor appetite for private debt in the past 12 months, while only 5% have seen a decrease.

 “The private debt industry experienced tremendous growth in 2017, with the year marking new records for both fundraising and capital distributions to investors. The maturing of the private debt landscape, however, has offered a host of challenges for fund managers that other, more established asset classes have suffered from, including higher valuations and increased competition for transactions,” Tom Carr, head of private debt products, said in a statement.

Founded in 2003, Preqin is a leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. More than 47,000 professionals in 90 nations use the company’s products.


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