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Chart of the week: Competition heats up between private equity and corporate debt

As private equity fundraising continues to slip, debt markets are growing.  

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Predictions for the private equity market have been full of doom and gloom this week. The Private Equity International European mid-market roundtable forecast a downturn, while Bain & Co suggested it was time for GPs to “stormproof” portfolios, as reported by PEI.

In contrast, the private debt market appears to be going from strength to strength. Private Debt Investor’s Annual Review 2015 discusses the positive fundraising environment for the asset class and the factors pushing investors towards illiquid credit investment.

PEI’s Research & Analytics team have compared private equity fundraising, not including mezzanine vehicles, to the corporate debt market.

Both markets followed a similar trend year-on-year, with fundraising gathering pace until 2013 before falling in 2014.

However, last year, while the private equity market collected $13.7 billion less than 2014 from funds closed, fundraising for closed-ended corporate debt vehicles increased by $23.9 billion.

As the private debt market continues to expand, the relationship between these two asset classes seems to be changing. As returns for large buyout funds dry up against the backdrop of a strong private debt market where there is still the potential for large returns, private equity fund managers are increasingly competing for investor capital with those of private debt vehicles.