Fund financings experienced positive growth and strong credit performance as an asset class through the end of 2016. Capital call subscription credit facilities (each, a “Subscription Facility”) sustained their steady growth as the product continues to diversify into various fund industries and follows the performance of capital raising in 2016.

Investor capital call (each, a “Capital Call”) funding performance continued its near-zero delinquency status, and we remain unaware of any Subscription Facility lender suffering any losses on any particular transaction. Below we set forth our views on the state of the Subscription Facility market and current trends likely to be relevant in 2017, as well as the market for secondary facilities and other fund financings (“Alternative Financings”).

In addition to such trends, this Market Review touches on recent updates with respect to public pension funds as well as the latest legal issues affecting fund financings.

Fundraising in 2016 and View to 2017

In our last Market Update, published in the Fall of 2016, we predicted a positive fundraising trend for private equity funds through 2016 (each, a “Fund”). Despite the volatility and uncertainty seen in each of the US and UK political spheres, our optimism proved to be correct for the balance of 2016.

Globally, Funds raised over $347 billion in investor (each, an “Investor”) capital commitments (“Capital Commitments”), which surpassed 2015 when $329 billion of commitments were raised. Flight to quality (or at least familiarity) continued in that larger sponsors continued to attract a more-concentrated share of commitments. Notably, the 10 largest Funds accounted for 26% of all fundraising and 12% fewer Funds closed in 2016 than in 2015, resulting in an average fund size of $471 million—an all-time high.

As the low interest rate environment persists, the interest in Funds appears to be high, and it seems that...