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fund managers: Private credit funds to invest $5 billion to $10 billion in 2024, says EY report


Investors are likely to pump in $5-$10 billion in private credit deals this year with new funds being raised and fund managers being bullish on real estate and manufacturing sectors, according to EY’s Private Credit report. The bullish sentiment is driven by factors like stabilised interest rates and an overall positive economic outlook.

The report surveyed leaders from top credit funds where half of them think spending on projects will drive private credit deals in the next 12 to 24 months, followed by stress-related financing. Real estate is expected to have the most deals, followed by manufacturing, but it’s seen as the riskiest sector. Despite enough funds, competition is rising. They expect a total investment of US$5–10 billion in private credit deals in 2024. Looking ahead, optimism is slightly higher for the next two to five years compared to the next one to two years.

“A growing economy, a cautious banking sector and a deliberate reduction in the wholesale books of NBFCs continue to provide a fertile ground for private credit funds to grow and deploy capital,”said Bharat Gupta, Debt and Special Situations Partner, EY India.

The deal pipeline is going to be robust this year as well with new AIFs being set up. At least 11 new AIFs have registered with credit/special situation orientation and five are in process for registration During the second half of 2023. Also, nine funds have announced new fund raises aggregating to more than US$2 b in H22023. In CY 2023, global funds contributed approximately 63% of the total deals by value, primarily due to their participation in large deals.

Total investments in this space rose 47% to $7.8billion in value across 108 transactions in 2023, compared to 2022, which recorded 77 deals to $5.3 billion, according to the report. Global funds played a key role in CY 2023, contributing to 63% of the total private credit deals by value while domestic funds led the way in terms of deal count, accounting for 61% of the total number of transactions.

The rise in deal value was led by Shapoorji Pallonji group’s refinancing and Oaktree’s Vedanta group investment, totaling $2.4 billion. “This validates the presence of stress/special situation opportunities and aligns with EY’s January 2023 survey, where 38% of fund managers predicted stress-related deals as the primary driver for private credit deals in CY 2023,” the report said. Real estate saw an increase from $1.6 billion in CY 2022 to $1.7 billion in CY 2023 and continues to attract investment interest from fund managers.

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