Sovereign wealth funds' direct lending make up largest private debt slice

Sovereign wealth funds invested the largest portion of their private debt holdings in direct lending, 46%. Special situations and distressed debt were 28% and 13%, respectively.

In the third quarter, distressed and special situations had a 6.4% one-year horizon internal rate of return. Mezzanine and bridge loan's IRR was 5.2%, followed by direct lending's 4.4%.

The median return for vintage 2017 for overall private debt funds was 9.5%. It was 7.4% for bottom quartile funds and 12.7% at the top quartile.