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Global private debt fund market now at US$440b: trade body

[LONDON] Private debt funds raised US$64 billion in 2014 and now manage US$440 billion globally, providing a lifeline to smaller businesses as banks lend less, the Alternative Investment Management Association said on Wednesday.

New rules since the financial crisis aiming to limit risk taking by banks have forced them to cut back on loans, tightened the underwriting requirements and increased loan approval times. Hedge funds and others have moved in to exploit the opportunity.

The study by the hedge fund trade body showed that the volume of deals in Europe by both alternative and more mainstream private debt funds rose 43 percent last year, with the number of funds doubling to 40 since 2012.

A further 81 new funds are in the market to raise 50 billion pounds (S$100.9 billion), it added.

These private debt funds have extended loans to sectors such as social housing, health, renewable energy and shipbuilding. "Buoyed by both increased demand from investors as well as a growing appetite from businesses for alternative sources of funding, these markets are starting to have a noticeable impact on economic activity," said Stuart Fiertz, president of Cheyne Capital and chairman of AIMA's Alternative Credit Council.