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Private Equity Management Fees Drop for the Second Year in a Row (Preqin)
GPs are finding it harder to raise funds and now must be more tactical during their fundraising process, offering incentives to entice investors including first-close discounts, carry-free co-investment opportunities, and management fee cuts.
As a result, mean management fees in private equity, private debt, and real estate are now close to the low end of their 20-year ranges, according to Preqin’s Private Capital Fund Terms Advisor report.
- Private equity funds that are raising and have a 2024 vintage had mean management fee rates of 1.74% for buyouts and 1.93% for growth equity strategies, compared to 1.85% and 1.97% for 2023 vintage funds.
- Private debt funds raising and closed in 2023 and 2024 have the second lowest average fee rate in private markets, ahead of real estate. However, over the past 10 years, the mean investment period management fee for direct lending funds has stayed close to 1.5%, while for non-direct lending funds the mean rate has fluctuated around 1.7%.
North American Private Debt Assets Expected to Continue Fast Growth (Pensions & Investments)
Private debt assets under management in North America more than tripled to $931.4 billion in 2023 from $273.4 billion in 2010, based on data provided by Preqin. That’s expected to nearly double by the end of 2029 to $1.74 trillion.
Direct lending has grown much faster than the overall market, increasing more than 11 times to $416 billion from $37.5 billion. The strategy is expected to reach AUM of $822.5 billion in 2029.
Most of the strategies are projected to experience an increase in their internal rates of return in the 2024 through 2029 period vs. 2018-2023.
Secondaries Deal Volume to Shatter Records as LPs Clamor for Liquidity (Mergers & Acquisitions)
Some $72 billion was recorded in the first half of 2024, putting it on pace for more than $140 billion for the year. The previous record was $132 billion transacted in 2021.
BlackRock is seeking to raise $4 billion for its second secondaries fund after its inaugural secondaries fund closed at an oversubscribed $2.4 billion in 2021.
The surge is attributed to both GPs and LP’s hunger for cash at a time when traditional exits have stalled.
The StepStone Group last week announced it crushed its $3.5 billion target for its latest secondaries fund, amassing $4.8 billion. StepStone Secondary Opportunities Fund V more than doubled its predecessor vehicle, which closed on $2.1 billion in 2020.
Coller Capital announced a new private credit secondaries fund for private wealth investors outside the U.S., seeded with $250 million. Coller pegs the credit secondaries addressable market at $4 trillion.
H1 2024 Global Private Debt Report (Pitchbook)
Private debt has been rewarded for its solid performance with strong fundraising momentum. In the traditional institutional channel—where it now ranks second to PE as the highest fundraising strategy—newly committed capital is on par with 2023, making it five straight years of $200 billion-plus raised globally.
In the wealth channel, fundraising has accelerated by nearly 40% YoY and could exceed $60 billion in 2024 in the US alone. In the insurance channel, credit has accounted for 62% of trailing 12-month (TTM) gross inflows to the “big seven” US alternative asset managers, and half of that is from their insurance channels.
H1 2024 private debt fundraising is in line with 2023, which recorded $215.5 billion raised for the full year.