The biggest lenders are bagging bigger chunks of the $1.4 trillion market for private credit as investors get choosier about where they park their money.

The 10 largest funds that have closed in the first nine months of the year, including ones run by Goldman Sachs Group Inc.’s asset management unit and Blackstone Inc., accounted for half of the $172 billion raised globally for direct lending in the period, according to a report published Wednesday by data provider Preqin.

“Investors remain positive on the asset class but are becoming more discerning in their allocations, with larger commitments going to fewer managers,” the firm said.

While global fundraising is on track to match last year’s $215 billion record, a closer look at the data shows a “more fragile” picture emerging of a market buffeted by higher interest rates and weaker prospects for economic growth, according to Preqin.

Only 106 private debt funds across Europe and North America closed in the first nine months of this year, compared with 209 across the whole of 2021.

“Despite strong fundraising by the largest funds, it hasn’t been smooth sailing for all private debt managers,” the report said, noting that a “significant proportion” of vehicles have closed below their initial target over the past three years.

Pulling Back
This year, investment banks pulled back from funding leveraged buyouts while struggling to shift tens of billions of dollars of debt from their balance sheets. Recent $1 billion-plus buyouts of businesses such as Coupa Software Inc. and Emerson Electric Co.’s climate technology unit were funded with the help of large private credit funds.

“There’s been a trend of consolidation towards larger funds,” said RJ Joshua, the lead analyst on Preqin’s report. “For the first time in a decade the top ten private debt funds represent half of all capital raised this year, which shows that incumbency is important.”

Ares Management Corp., Arcmont Asset Management and Carlyle Group Inc. are among the more established private lending units currently marketing large funds, according to previous reports from Bloomberg News. Preqin expects the market to grow to $2.3 trillion over the next five years.

This article was provided by Bloomberg News.