New industry research has been published by the Alternative Credit Council, the private credit affiliate of the Alternative Investment Management Association, and global law firm Dechert LLP, entitled: ‘In Partnership: Trends in Private Credit Fund Structuring how private credit fund managers are increasingly providing investors with customised exposure to the asset class’.
The research identifies three key trends that are driving this change:
Greater investor demand for structures that provide customised exposure to private credit strategies;
Growing appetite for hybrid and evergreen funds; and
Growing appetite of private credit fund managers to raise capital from retail clients.
In Partnership includes exclusive data and insights into how these trends are shaping the expanding USD1.5 trillion private credit market.
80 per cent of surveyed private credit managers report managing capital through a combination of commingled funds and other vehicles. Almost all (95 per cent) of the firms offer managed accounts for single investors, with 69 per cent of all respondents expecting investor demand for co-investment to increase.
The report highlights how private credit fund managers operate funds with a range of liquidity profiles and explores the growing role of hybrid or evergreen fund structures. 51 per cent of respondents have funds that offer investors some right to redemption and 48 per cent expect investor demand for liquidity to increase. In Partnership finds that investors seeking ongoing exposure to private credit value how evergreen funds can offer flexibility and support efficient capital raising and deployment.
Leverage is another area where private credit funds are customising their offering, with 41 per cent of respondents including levered and unlevered sleeves and another 12 per cent considering to offer such flexibility for future fundraising.
In Partnership also provides insights into the growing appetite of private credit funds to raise capital from retail investors. Two thirds of firms are currently, or are considering, raising capital from retail clients for upcoming fund offerings, compared to 41 per cent who have retail clients today.
The research draws on survey data from 40 private credit fund managers representing an estimated USD800 billion private credit assets under management and interviews with leading private credit fund managers.
Commenting on the findings, Gus Black, Partner at Dechert, says: “Private credit has emerged as one of the most significant global asset classes as it can offer predictable returns, flexibility and resilience in the face of market volatility. The research highlights increasing investor demand is coupled with a growing need for customisation and flexibility when raising capital”.
Jiří Król, Global Head of the Alternative Credit Council, says: “Private credit is a permanent fixture in the allocation models of many global investors. Customised structures play an important role in accommodating this demand for ongoing exposure to private credit strategies, and ensures that investors can tailor exposure according to their risk appetite“.