PRIVATE CREDIT FUNDS ENTER AGE OF CUSTOMISATION

LONDON, Sept. 15, 2023 /PRNewswire/ — New industry research reveals how private credit fund managers are increasingly providing investors with customised exposure to the asset class.  Published by the Alternative Credit Council, the private credit affiliate of the Alternative Investment Management Association, and global law firm Dechert LLP, In Partnership: Trends in Private Credit Fund Structuring (“In Partnership”) 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 US$1.5 trillion private credit market.

80% of surveyed private credit managers report managing capital through a combination of commingled funds and other vehicles. Almost all (95%) of the firms offer managed accounts for single investors, with 69% 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% of respondents have funds that offer investors some right to redemption and 48% 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% of respondents including levered and unlevered sleeves and another 12% 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% who have retail clients today.

The research draws on survey data from 40 private credit fund managers representing an estimated US$800 billion private credit assets under management and interviews with leading private credit fund managers.

Commenting on the findings, Gus Black, Partner at Dechert, said: “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, said: “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”.

https://www.dechert.com/knowledge/publication/trends-in-private-credit-funds-structuring.html

About ACC

The Alternative Credit Council (ACC) is a global body that represents asset management firms in the private credit and direct lending space. It currently represents 250 members that manage over US$800bn of private credit assets.

The ACC is an affiliate of AIMA and is governed by its own board which ultimately reports to the AIMA Council.

ACC members provide an important source of funding to the economy. They provide finance to mid-market corporates, SMEs, commercial and residential real estate developments, infrastructure as well the trade and receivables business.

The ACC’s core objectives are to provide guidance on policy and regulatory matters, support wider advocacy and educational efforts and generate industry research with the view to strengthening the sector’s sustainability and wider economic and financial benefits.

Alternative credit, private debt or direct lending funds have grown substantially in recent years and are becoming a key segment of the asset management industry. The ACC seeks to explain the value of private credit by highlighting the sector’s wider economic and financial stability benefits.

About AIMA

The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with around 2,100 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than US$2.5 trillion in hedge fund and private credit assets.

AIMA draws upon the expertise and diversity of its membership to provide leadership in industry initiatives such as advocacy, policy and regulatory engagement, educational programmes and sound practice guides. AIMA works to raise media and public awareness of the value of the industry.

AIMA set up the Alternative Credit Council (ACC) to help firms focused on the private credit and direct lending space. The ACC currently represents over 250 members that manage US$800 billion of private credit assets globally. 

AIMA is committed to developing skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialised educational standard for alternative investment specialists. AIMA is governed by its Council (Board of Directors).

About Dechert

Dechert is a global law firm that advises asset managers, financial institutions and corporations on issues critical to managing their business and their capital – from high-stakes litigation to complex transactions and regulatory matters. We answer questions that seem unsolvable, develop deal structures that are new to the market and protect clients’ rights in extreme situations. Our 1,000+ lawyers across 21 offices globally focus on the financial services, private equity, private credit, real estate, life sciences and technology sectors.