Sovereign wealth funds are now among the most active players in the private debt space according to new research from Prequin, with the number of them investing in the asset class up 5% over the last year. All told 39% of sovereign wealth funds are invested in private debt – and the majority with over $10 million in assets now invest in the asset class.
Private debt has been on the rise in institutional portfolios as large investors step in to fill the gap left by banks forced to curb their lending post-financial crisis. Mid-market companies seeking to expand have become a big part of the private debt landscape that is now heavily used by sovereign wealth funds.
According to Prequin, all sovereign wealth funds with assets between US$100 billion and $249 billion hold private debt.
While the presence of sovereign wealth funds in the private debt space has increased substantially, allocations have actually declined – capital raised for private debt funds closed on 2016 stood at $94 billion – that’s down from $98 billion in 2015 (which is still four times as much as was raised in 2009).
Europe is the most favoured region for private debt exposure for 60% of sovereign wealth funds, ahead of North America (53%).