Audax Raises Big Direct Lending Fund Despite Industry Slowdown

Audax Group has raised $1.65 billion for a direct lending fund, exceeding its original target despite the industry's significant slowdown in fundraising last year.

The firm’s Direct Lending Solutions Fund closed with $1.25 billion of commitments from a diverse group of institutional investors globally, according to a statement Tuesday from Audax. The new pool attracted investors from the U.S., Europe, Asia‐Pacific, the Middle East, Canada, and Latin America.

Direct Lending Solutions will provide financing for companies backed by private equity firms, investing as much as $175 million per deal, according to the statement. Including leverage, the fund has more than $2.6 billion to invest in middle-market companies in North America.

While direct lending remains a popular strategy in private debt markets, fundraising has declined. Direct lending funds amassed $45 billion in 2018, down about 34 percent from the year before, according to Preqin, a provider of alternative-assets data. 

“It is curious to see direct lending fundraising fall so steeply,” Tom Carr, head of private debt at Preqin, said in a research report released this week. “It may indicate that investors’ concerns about the potential for an equity market downturn are making them less inclined to provide the funding components of deals that may be exposed in the event of a correction." 

[II Deep Dive: White Oak Plans to Raise as Much as $2.5 Billion for Direct Lending Fund] 

Audax's new fund attracted commitments from Alaska Permanent Fund Corp., which contributed $125 million in 2017, and the Pennsylvania Employees’ Retirement System, which last year agreed to invest as much as $75 million, meeting minutes from each fund show.

Alternative investment firm Audax manages more than $16 billion in private equity and private debt assets, according to its website.