PREQIN QUARTERLY UPDATE: PRIVATE DEBT Q Insight on the quarter from the leading provider of alternative assets data.

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1 PREQIN QUARTERLY UPDATE: PRIVATE DEBT Q1 17 Insight on the quarter from the leading provider of alternative assets data Content includes: Fundraising Funds in Market Institutional Investors Dry Powder alternative assets. intelligent data.

2 PREQIN QUARTERLY UPDATE: PRIVATE DEBT, Q1 17 FOREWORD - Ryan Flanders, Preqin Eighteen private debt funds reached a final close in the first quarter of 17, securing just under $bn. Capital commitments in the quarter were strong, with $7bn more secured than in the same quarter last year, despite fewer funds closing. Private debt globally is coming off the strongest three-month period in the history of the asset class, with $5bn secured across 46 funds in Q4 16. Investor appetite has held firm for North America- and Europe-focused funds, with both regions seeing eight funds close in Q1, although North America-focused funds secured nearly $bn more than Europe-focused vehicles. Direct lending funds closed the period with the most vehicles (1) and aggregate capital secured ($11.9bn), while distressed debt funds secured $4.bn, followed by special situations funds closing on $.6bn in commitments. 17 is certainly off to a strong start, specifically bolstered by the highly active direct lending segment in the US. Fund managers across strategies are seeing increased and sustained investor appetite for access to all parts of the market at this point in the credit cycle, when a hybrid of private debt strategies are poised to return strong results. Finally, with 84 private debt funds in market globally targeting more than $11bn, competition for investor allocations will remain fierce for the remainder of 17. We hope that you find this report useful and welcome any feedback you have. For more information, please visit wwww.preqin.com or contact info@preqin.com. p3 p4 p5 p6 Fundraising Funds in Market Institutional Investors Dry Powder PRIVATE DEBT ONLINE Private Debt Online is the leading source of data and intelligence on the growing private debt industry and tracks all aspects of the asset class, including fund managers, fund performance, fundraising, institutional investors and more. Constantly updated by our team of dedicated researchers, Private Debt Online represents the most complete source of industry intelligence available today, with global coverage and all fund managers and investors profiled. Get in touch today to arrange a demo of Private Debt Online: : info@preqin.com : All rights reserved. The entire contents of Preqin Quarterly Update: Private Debt, Q1 17 are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Preqin Quarterly Update: Private Debt, Q1 17 is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent financial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for any decisions of whatever nature the reader makes or refrains from making following its use of Preqin Quarterly Update: Private Debt, Q1 17. While reasonable efforts have been made to obtain information from sources that are believed to be accurate, and to confirm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warranty that the information or opinions contained in Preqin Quarterly Update: Private Debt, Q1 17 are accurate, reliable, up-to-date or complete. Although every reasonable effort has been made to ensure the accuracy of this publication Preqin Ltd. does not accept any responsibility for any errors or omissions within Preqin Quarterly Update: Private Debt, Q1 17 or for any expense or other loss alleged to have arisen in any way with a reader s use of this publication. Preqin Ltd. 17 /

3 DOWNLOAD DATA PACK: FUNDRAISING Eighteen private debt funds reached a final close in Q1 17, totalling just under $bn in capital commitments (Fig. 1), well behind the previous quarter, which saw 46 funds close for a record $5bn. Quarterly fundraising since 13 has seen an average of 38 funds secure around $bn in aggregate capital; no other quarter since Q1 13 has had fewer than 6 fund closures. North America- and Europe-focused funds each had eight closings in Q1, totalling $11bn and $9bn respectively, and two Asiafocused vehicles closed (Fig. ). Fig. 1: Private Debt Fundraising, Q Q Direct lending vehicles raised more than half ($11.9bn) of all capital secured by private debt funds closed in Q1 17, followed by $4.bn from two distressed debt funds (Fig. 3). Mezzanine accounted for the smallest amount of capital, with $1.bn raised via four funds, while two special situations funds raised $.6bn. Private debt funds of funds and venture debt vehicles did not see any closings in the first quarter. Hayfin Capital Management s Hayfin Direct Lending Fund II was the largest fund closed in the first quarter of 17 ( 3.6bn), and Alcentra Group s Alcentra European Direct Lending Fund II secured.8bn; both are targeting European direct lending opportunities (Fig. 4). Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q Date of Final Close No. of Funds Closed Aggregate Capital Raised ($bn) Fig. : Private Debt Fundraising in Q1 17 by Primary Geographic Focus Fig. 3: Private Debt Fundraising in Q1 17 by Fund Type North America Europe Asia & Rest of World Distressed Debt Mezzanine Direct Lending Special Situations Primary Geographic Focus No. of Funds Closed Aggregate Capital Raised ($bn) No. of Funds Closed Fund Type Aggregate Capital Raised ($bn) Fig. 4: Five Largest Private Debt Funds Closed in Q1 17 Fund Firm Fund Size (mn) Type Geographic Focus Hayfin Direct Lending Fund II Hayfin Capital Management 3,6 EUR Direct Lending Europe Alcentra European Direct Lending Fund II Alcentra Group,87 EUR Direct Lending Europe Carlyle Strategic Partners IV Carlyle Group,5 USD Distressed Debt US Marlin Equity Partners V Marlin Equity Partners,5 USD Special Situations US Cerberus Levered Loan Opportunities Fund III Cerberus Capital Management,5 USD Direct Lending US 3

4 PREQIN QUARTERLY UPDATE: PRIVATE DEBT, Q1 17 FUNDS IN MARKET As at the start of Q 17, there were 84 private debt funds seeking an aggregate $11bn in capital. These figures are roughly the same as they were in Q1 16, when 6 funds were targeting $13bn globally. Direct lending vehicles continue to represent the largest proportions of both funds in market and aggregate capital targeted, with 16 funds seeking $43bn (Fig. 5). Thirty-nine distressed debt funds are in market targeting just over $34bn, while 33 special situations funds seek $16bn in capital. North America-, Asia- and Rest of World-focused funds have each seen a rise in the number of private debt vehicles in market compared to Q1 16, while there are six fewer targeting Europe (Fig. 6). More than three-quarters (77%) of private debt funds in market have been on the road for two years or less. The largest proportion (35%) of private debt funds in market have been on the road for 13-4 months, whereas 4% have been fundraising for six months or less (Fig. 7). Fig. 5: Private Debt Funds in Market by Fund Type Proportion of Funds in Market 1% 9% 8% 7% 6% 5% 4% 3% % 1% % 5% 4% 1% % 14% 44% No. of Funds Raising 1% % 14% 13% 31% 38% Venture Debt Private Debt Fund of Funds Special Situations Mezzanine Distressed Debt Direct Lending Aggregate Capital Targeted ($bn) The five largest funds in market account for 18% of total capital targeted within the private debt asset class. GSO Capital Solutions Fund III, the largest fund in market, is currently seeking $6.5bn for distressed debt opportunities in North America (Fig. 8). Fig. 6: Private Debt Funds in Market by Primary Geographic Focus, Q1 16 vs. Q Q1 16 Q1 17 Q1 16 Q1 17 Q1 16 Q1 17 Q1 16 Q1 17 North America Europe Asia Rest of World No. of Funds Raising Primary Geographic Focus Aggregate Capital Targeted ($bn) Fig. 7: Time Spent on the Road by Private Debt Funds in Market Proportion of Funds in Market 4% 35% 3% 5% % 15% 1% 5% % 4% 6 Months or Less 18% 7-1 Months 35% 13-4 Months 13% 5-36 Months 11% More than 36 Months Time Spent on the Road Fig. 8: Five Largest Private Debt Funds in Market Fund Firm Target Size (mn) Type Geographic Focus GSO Capital Solutions Fund III GSO Capital Partners 6,5 USD Distressed Debt North America Apollo European Principal Finance Fund III Apollo Global Management 3,5 USD Distressed Debt Europe Centerbridge Special Credit Partners III-Flex Centerbridge Capital Partners 3,5 USD Distressed Debt North America HPS Specialty Loan Fund IV HPS Investment Partners 3,5 USD Direct Lending North America Cerberus Institutional Partners VI Cerberus Capital Management 3,5 USD Distressed Debt North America 4 Preqin Ltd. 17 /

5 DOWNLOAD DATA PACK: INSTITUTIONAL INVESTORS Preqin s Private Debt Online tracks more than,5 active investors in private debt. The 1 largest investors currently allocate a combined $76bn to the asset class (Fig. 9). Half of these investors are based in the US, including TIAA, which currently allocates $5.9bn to private debt funds, amounting to 3% of its total assets. Over the next 1 months, the largest proportion (51%) of active private debt investors will target mezzanine funds, for the second consecutive year (Fig. 1). The proportion of investors targeting direct lending funds over the next 1 months has increased from 36% in Q1 16 to 4% in Q1 17, while a slightly larger proportion (46%) of investors will target distressed debt funds. Over a quarter (7%) of investors are seeking special situations opportunities, followed by smaller groups looking for exposure to venture debt and private debt fund of funds vehicles (5% and 3% respectively). Europe and North America are likely to remain the most targeted regions for private debt investors over the coming year, as sought by 41% and 38% of investors seeking opportunities respectively (Fig. 11). While North America and Europe attract the majority of investor capital, 18% of investors plan to target private debt investments in Asia over the next 1 months, a two-percentagepoint increase from December 16. Fig. 9: 1 Largest Investors by Current Allocation to Private Debt Investor Type Location Current Allocation to Private Debt ($bn) TIAA Private Sector Pension Fund US 5.9 New York State Teachers' Retirement System Public Pension Fund US 8.8 Partners Group Private Equity Fund of Funds Manager Switzerland 7. Netherlands Development Finance Company (FMO) Government Agency Netherlands 6.8 KB Insurance Insurance Company South Korea 5.5 African Development Bank Bank Ivory Coast 5.3 California Public Employees' Retirement System (CalPERS) Public Pension Fund US 5. FINEP Government Agency Brazil 4.1 Arizona State Retirement System Public Pension Fund US 4.1 Oregon State Treasury Public Pension Fund US 3.6 Fig. 1: Strategies Targeted by Private Debt Investors in the Next 1 Months Proportion of Fund Searches 6% 5% 4% 3% % 1% % 51% 46% Mezzanine Distressed Debt 4% Direct Lending 7% Special Situations 5% Venture Debt 3% Fund of Funds Strategy Targeted Fig. 11: Regions Targeted by Private Debt Investors in the Next 1 Months Proportion of Fund Searches 45% 4% 35% 3% 5% % 15% 1% 5% % 38% 41% 18% North America Europe Asia Rest of World Region Targeted 8% 5

6 PREQIN QUARTERLY UPDATE: PRIVATE DEBT, Q1 17 DRY POWDER As at March 17, private debt managers hold more than $196bn in dry powder, up $mn from December 16 (Fig. 1). Distressed debt funds hold $66bn in dry powder, the most of any private debt strategy, followed by direct lending ($58bn) and mezzanine ($51bn). North America-focused funds have $13bn in available capital (Fig. 13). This figure is down over $3bn from December 16, but still accounts for two-thirds of total capital available to the asset class. Funds focused on Europe have added more than $4bn in aggregate dry powder over the same time period, with $55bn currently available for investment. Dry powder levels for Asia- and Rest of World-focused funds declined somewhat, and currently stand at $9.6bn and $1.5bn respectively. Fig. 14 displays total private debt dry powder versus that of buyout funds since 8; this puts the private debt market into historical perspective amid recent years of substantial growth. Aggregate dry powder for all private debt strategies remains just under $bn, and continues to hover at over a third (37%) of the value of global buyout fund dry powder ($53bn). Oaktree Capital Management still holds the largest amount ($17.bn) of available capital among private debt managers, followed by GSO Capital Partners ($13.6bn) and Goldman Sachs Merchant Banking Division ($8.3bn, Fig. 15). Fig. 1: Private Debt Dry Powder by Fund Type, 8-17 Dry Powder ($bn) Dec-8 Dec-9 Dec-1 Dec-11 Dec-1 Dec-13 Dec-14 Dec-15 Dec-16 Direct Lending Mezzanine Venture Debt Distressed Debt Special Situations Mar-17 Fig. 13: Private Debt Dry Powder by Primary Geographic Focus, 8-17 Dry Powder ($bn) Dec-8 Dec-9 Dec-1 Dec-11 Dec-1 Dec-13 Dec-14 Dec-15 Dec-16 North America Europe Asia Rest of World Mar Fig. 14: Dry Powder: Private Debt vs. Buyout, 8-17 Dry Powder ($bn) Dec-8 Dec-9 Dec-1 Dec-11 Dec-1 Dec-13 Dec-14 Dec-15 Dec-16 Mar-17 Private Debt Buyout Fig. 15: 1 Largest Private Debt Fund Managers by Estimated Dry Powder Firm Headquarters Estimated Dry Powder ($bn) Oaktree Capital Management US 17. GSO Capital Partners US 13.6 Goldman Sachs Merchant Banking Division US 8.3 HPS Investment Partners US 7. Intermediate Capital Group UK 6. Hayfin Capital Management UK 5.9 Ares Management US 4.8 Fortress Investment Group US 4.6 Cerberus Capital Management US 4. Centerbridge Capital Partners US Preqin Ltd. 17 /

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8 PRIVATE DEBT ONLINE With global coverage and detailed information on all aspects of the private debt asset class, Preqin s industry-leading Private Debt Online service keeps you up-to-date on all the latest developments in the private debt universe. Find out how Preqin s range of private debt products and services can help you: New York London Singapore San Francisco Hong Kong Manila alternative assets. intelligent data.