Key Takeaways
- • Equable Institute reported on July 23 that U.S. state and local pension systems have reached their best-funded status since 2009, yet unfunded liabilities still total $1.13 trillion, according to the op-ed.
- • Defined-benefit funds among the 200 largest U.S. retirement plans held $198.4 billion in private credit as of Sept. 30, 2024, up 57.2% from $126.2 billion a year earlier, per Pensions & Investments' annual survey.
- • CalSTRS, a $402 billion system, holds private credit funds managed by Blue Owl Capital and is the largest investor in Blue Owl Capital Corp, according to Reuters citing LSEG data.
- • Several private credit vehicles, including Blackstone's BCRED, Blue Owl's OCIC and OTIC, and Apollo's Debt Solutions BDC, capped investor withdrawals in the first half of 2026 below requested levels.
- • The author urges pension boards to demand fund-level transparency into private credit holdings and to stress test portfolios against redemption pressure.
Summary
An op-ed by Jay Rogers, a financial professional with more than 30 years of experience in private equity, private credit, hedge funds and wealth management, argues that public pension systems are concentrating retirement assets in private credit without adequate transparency. The piece responds to an Equable Institute report from July 23 showing state and local pension systems at their best-funded level since 2009. The author contends that improvement does not eliminate a $1.13 trillion unfunded liability.
The author cites Pensions & Investments' annual survey, which found defined-benefit funds among the 200 largest U.S. retirement plans held $198.4 billion in private credit as of Sept. 30, 2024. That figure was up 57.2% from $126.2 billion a year earlier and roughly 7.6 times the level five years prior. The op-ed argues this growth coincided with a retail boom in the same funds now facing redemption pressure.
CalSTRS, a $402 billion California teacher pension, is presented as the clearest example. According to Reuters, citing LSEG data, CalSTRS is the largest investor in Blue Owl Capital Corp, a publicly traded business development company. A CalSTRS spokesperson told Reuters the system remains committed to its long-term private credit strategy. The op-ed also notes Arizona's Public Safety Personnel Retirement System, which reported a 14.9% allocation as of March 31 against a 20% target, and Kentucky's Employees' Retirement System, which carries the same 20% target and told its investment committee last November that private credit remains attractive relative to private equity.
The author argues that public pension reporting shows manager commitments and broad asset-class targets but not fund-by-fund exposure to vehicles such as Blackstone's BCRED, Blue Owl's OCIC and OTIC, and Apollo's Debt Solutions BDC, which capped withdrawals in the first half of 2026. Morgan Stanley's credit team has projected direct lending default rates could climb to 8%, concentrated in the roughly 26% of exposure to software borrowers under pressure from artificial intelligence, according to the op-ed. Howard Marks, in an April memo, warned that some direct lending managers accepted too much capital too quickly.
The author does not call for abandoning private credit, acknowledging that diversified, conservatively underwritten direct lending has a long-standing place in institutional portfolios. Instead, the piece recommends that pension boards require fund-level transparency into private credit holdings and stress testing against redemption scenarios as a matter of fiduciary duty.
The author cites Pensions & Investments' annual survey, which found defined-benefit funds among the 200 largest U.S. retirement plans held $198.4 billion in private credit as of Sept. 30, 2024. That figure was up 57.2% from $126.2 billion a year earlier and roughly 7.6 times the level five years prior. The op-ed argues this growth coincided with a retail boom in the same funds now facing redemption pressure.
CalSTRS, a $402 billion California teacher pension, is presented as the clearest example. According to Reuters, citing LSEG data, CalSTRS is the largest investor in Blue Owl Capital Corp, a publicly traded business development company. A CalSTRS spokesperson told Reuters the system remains committed to its long-term private credit strategy. The op-ed also notes Arizona's Public Safety Personnel Retirement System, which reported a 14.9% allocation as of March 31 against a 20% target, and Kentucky's Employees' Retirement System, which carries the same 20% target and told its investment committee last November that private credit remains attractive relative to private equity.
The author argues that public pension reporting shows manager commitments and broad asset-class targets but not fund-by-fund exposure to vehicles such as Blackstone's BCRED, Blue Owl's OCIC and OTIC, and Apollo's Debt Solutions BDC, which capped withdrawals in the first half of 2026. Morgan Stanley's credit team has projected direct lending default rates could climb to 8%, concentrated in the roughly 26% of exposure to software borrowers under pressure from artificial intelligence, according to the op-ed. Howard Marks, in an April memo, warned that some direct lending managers accepted too much capital too quickly.
The author does not call for abandoning private credit, acknowledging that diversified, conservatively underwritten direct lending has a long-standing place in institutional portfolios. Instead, the piece recommends that pension boards require fund-level transparency into private credit holdings and stress testing against redemption scenarios as a matter of fiduciary duty.
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