U.S. Capital Markets Glide Path to Clearer Skies

It’s time for debt, distressed & opportunistic capital to step In Debt and opportunistic comprise 75% of YTD fundraising

Fundraising by Strategy (Billions)

Lots of Dry Powder Still Available for These Strategies

Debt, Distressed and Opportunistic All Other Strategies Debt, Distressed, Opportunistic % of Total

Opportunistic Debt

Distressed

$100 $120 $140 $160

$100 $120

0% 10% 20% 30% 40% 50% 60% 70% 80%

$0 $20 $40 $60 $80

$0 $20 $40 $60 $80

• Investor interest in debt-oriented profiles has increased as sentiment has shifted towards more conservative strategies within the capital stack. Amid such conservatism, some investors are shifting their capital deployment strategies higher up the capital stack towards either preferred equity, mezzanine debt or senior debt, which will help to fill (a portion of) the funding gaps for owners that need to recapitalize as their loans are maturing and as they need additional capital. • Private credit can achieve equity-like returns in the debt capital structure. Given the continued lack of liquidity with banks, the allocation limits facing life insurers, and the anemic CMBS market, private credit should balloon. • The issue now becomes how many deals, business plans, etc., can stomach a largely floating rate index plus a spread that equates to an 8% plus coupon….

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Source: Preqin, Cushman & Wakefield Research