Major pension funds across North America and Europe are significantly increasing their exposure to private credit investments, seeking higher yields in a changing interest rate environment. The shift represents one of the most significant asset allocation changes in decades.
CalPERS, the largest U.S. public pension fund, announced plans to double its private credit allocation to 8% of its $450 billion portfolio. Similar moves are being made by Canadian pension giants like CPP Investments and Ontario Teachers.
"Private credit offers attractive risk-adjusted returns that are difficult to find in public markets," said investment strategist Robert Kim. "Pension funds are drawn to the steady income streams and lower volatility."
The trend has fueled explosive growth in private credit funds managed by firms like Blackstone, Apollo, and Ares. Industry assets under management have grown to over $1.5 trillion globally, up from just $400 billion a decade ago.
However, some analysts warn about potential risks, including liquidity concerns and the lack of transparency in private markets. Regulators are paying closer attention to the sector's rapid growth.
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