There’s a record amount of dry powder sitting in the distressed private capital space, according to new data from Preqin.
Between distressed debt, special situations and turnaround strategies, total dry powder in the distressed private capital arena sits at an estimated US$131 billion as of June 2020, an all-time record. Of note, the distressed private capital market has grown overall to about US$372 billion in assets under management as of September 2019.
“Amid the global market downturn caused by the COVID-19 pandemic, many large and established private debt managers are seeking significant capital in anticipation of potential defaults,” the Preqin report said.
So far this year, the market has seen 19 funds close with an aggregate US$18 billion in capital raised. In 2019, 67 funds closed with aggregate capital of US$53 billion. “Although fundraising at the midpoint of 2020 is some way off the mark compared with recent years, several large distressed funds have closed so far this year,” the research noted.
The vast majority of the dry powder is controlled by U.S. fund managers (US$103.9 billion) with managers in Europe, the Middle East and Africa collectively (US$16.6 billion) a distant second.