Private debt fund managers raise capital through various methods, including:
1. **Fundraising**: Private debt fund managers actively seek capital from institutional investors, such as pension funds, insurance companies, endowments, and sovereign wealth funds. They pitch their investment strategies and track records to attract investors who are looking for exposure to private debt.
2. **Capital commitments**: Investors commit a certain amount of capital to the fund manager, typically over a specified period. These commitments are legally binding and provide the fund manager with a pool of capital to invest.
3. **Capital calls**: Once the fund manager identifies investment opportunities, they make capital calls to investors, requesting them to contribute their committed capital. Capital calls are typically made when the fund manager has identified suitable investment opportunities and needs the capital to execute the investment.
4. **Debt financing**: Private debt fund managers may also use debt financing to supplement the capital raised from investors. They can secure loans or lines of credit from financial institutions to increase their investment capacity and leverage their returns.
5. **Co-investment**: In some cases, private debt fund managers may offer co-investment opportunities to their investors. This allows investors to directly invest alongside the fund manager in specific transactions, providing additional capital and potentially enhancing returns.
It’s important to note that the specific methods used by private debt fund managers to raise capital may vary depending on the fund manager’s strategy, track record, and investor base. Additionally, regulatory requirements and market conditions can also influence the fundraising process.
Citations:
[1] https://www.privatedebtinvestor.com/key-terms-and-methodology/
[2] https://prospectrockpartners.com/top-100-private-debt-fund-managers/
[3] https://pitchbook.com/news/articles/private-debt-fundraising-funds-in-market-2023
[4] https://www.privatedebtinvestor.com/the-meteoric-rise-of-private-debt/
[5] https://www.toptal.com/finance/private-equity-consultants/private-equity-fund
[6] https://dealroom.net/blog/capital-raising