The $5.4 billion hard-cap close for Direct Lending Solutions Fund III, 80% larger than its predecessor, points to where private credit stress is showing up and where it isn't.
Private credit had two very different days on Wednesday, depending on how the money was structured.
Audax Private Debt said its Direct Lending Solutions Fund III closed at its $5.4 billion hard cap, against a $4 billion target, making it the largest fund in the firm's history. Counting targeted leverage, related vehicles and the general partner's own commitment, the firm puts investable capital at about $10 billion. The equity commitments are $5.4 billion. The larger figure is buying power, not fund size.
Fund II raised $3 billion of equity in 2022, with more than $5 billion of investable capital, so Fund III is 80% larger on commitments. It has committed about $1.5 billion so far, roughly 28% of its equity, and can write checks of up to $350 million per deal. Audax Private Debt manages more than $30 billion.
The contrast
The same day, Metrics Credit Partners, which manages about A$40 billion in Australia, froze redemptions at about A$9.3 billion of unlisted funds after its auditor forced markdowns at three listed trusts.
The two sit at opposite ends of private credit's structures. Audax's fund is a closed-end vehicle raised from institutions, with capital committed for the life of the fund. The Metrics funds allowed investors to redeem, and the listed trusts traded on the ASX until their suspension.
Two readings
One reading is that this year's stress in private credit is concentrated in vehicles that promise liquidity, from U.S. non-traded business development companies to Australian wholesale funds, while institutional fundraising carries on. A close 35% above target is hard to square with a broad retreat from the asset class. Two data points on one day are not a trend, but they point the same way.
The other reading is that fundraising measures demand for the asset class, not the quality of loans already made. Audax has deployed about 28% of Fund III, and the rest will be lent into the same rate environment that led Metrics' auditor to weight downside scenarios more heavily.
What to watch
The pace at which Audax puts the remaining 72% of equity to work, and how often deals approach its $350 million limit, will show borrower demand. On the semi-liquid side, the next markers are Metrics' audited accounts and the date its redemption gates reopen.