Hard Assets Widen Lead Over Credit as Alts Fundraising Falls 14%
The rotation away from private credit in the wealth channel is accelerating. Alternative investment fundraising fell 14% through September as credit sales collapsed, but investors kept pouring money into real estate and infrastructure, and a growing share is flowing through private placements rather than public programs, according to Robert A. Stanger & Co.
Fundraising totaled $134.4 billion through September, down from $156.4 billion a year earlier. Credit strategies raised $42.5 billion, down 48%, while non-credit fundraising rose 24% to $91.9 billion.
HALO strategies — hard assets with low obsolescence, meaning real estate and infrastructure — raised $44.7 billion, up 39%, and now lead credit by $2.2 billion this year. Infrastructure jumped 67% to $22.8 billion, and real estate rose 18% to $21.9 billion. Hard assets have outraised credit for six straight months.
The gap widened in the third quarter, when HALO strategies raised $16.3 billion, up 54%, while credit fell 61% to $11.1 billion. A year earlier, credit raised about 2.7 times as much as real estate and infrastructure combined.
“The overall decline in fundraising doesn’t tell the full story,” said Kevin Gannon, Stanger’s chairman and CEO. “Credit is weighing heavily on the totals, but outside of credit, capital formation is growing at a healthy pace.”
Business development companies account for most of the credit pullback. BDC fundraising fell 62% to $18.8 billion, with publicly registered non-listed BDCs down 76% to $8.6 billion. The drop follows a wave of redemption requests that pushed many large non-traded BDCs to cap withdrawals this year.
Private placements raised $69.5 billion, up 10%, and accounted for 52% of fundraising, up from 40% a year earlier. Public programs fell 30% to $64.9 billion.
In a sign of the shift, Cliffwater’s new Cascade Real Assets Fund, a real estate interval fund, raised $895 million at its first closing in September.
Cliffwater subsequently announced that the interval fund surpassed $1 billion in net assets in its first month, extending its platform beyond credit and private equity into real assets.