Key Takeaways
- • Close to US$300bn flowed into private credit vehicles from institutional investors in 2025, even as the sector went through its most turbulent stretch in years.
- • APG, Europe's largest pension investor, plans to lift private markets exposure above 30% of assets and could raise its private debt allocation to 2-4% from roughly 1.5%, according to Reuters.
- • Nest has committed £450m to US private credit and targets a 30% overall private markets allocation by 2030; Arizona's PSPRS holds about 17% in private credit and aims for 20%.
- • Blue Owl Capital limited withdrawals in two non-traded business development companies after record redemption requests, while CalSTRS, a US$402bn system and Blue Owl's largest BDC investor, says it remains committed to private credit.
- • Mercer's Systermans attributes redemptions to liquidity rather than credit quality, with defaults low and corporate profitability high, though stress is concentrated in large-cap, sponsored, covenant-light lending with heavy software exposure.
Summary
Institutional capital continues to flow into private credit despite the sector's most turbulent period in years. Close to US$300bn moved into private credit vehicles from institutional investors in 2025, and several major pension systems are not only maintaining their allocations but expanding them.
APG, Europe's largest pension investor, plans to raise its private markets exposure above 30% of assets and could increase its private debt allocation to between 2% and 4% from roughly 1.5% currently, according to Reuters. In the UK, Nest has committed £450m to US private credit and is targeting a 30% overall private markets allocation by 2030. In Arizona, the Public Safety Personnel Retirement System holds around 17% of its assets in private credit and aims to reach 20%, according to chief investment officer Mark Steed, who spoke to Reuters.
Proponents point to the structural logic of long-duration capital. Sebastien Betermier, executive director of the ICPM Network, a global body of more than 50 pension funds, told CNBC that large institutional investors can hold less liquid assets thanks to their "scale and long investment horizons." Olaolu Aganga, head of portfolio construction at Citi Wealth CIO, noted that allocations are difficult to unwind: commitments are signed before capital is deployed, and managers draw it gradually over several years, so a shift in sentiment does not quickly reduce exposure.
The resilience is being tested, however. Blue Owl Capital limited withdrawals in two of its non-traded business development companies after investors submitted record redemption requests. CalSTRS, a US$402bn system and Blue Owl's largest BDC investor, declined to comment on the specific situation but said it "remain[s] committed to our long-term investment strategy, including investing in private credit," spokesperson Melissa Jones-Ferguson told Reuters.
Skeptics warn of a reckoning. Johns Hopkins Carey Business School finance lecturer Jeffrey Hooke told CNBC the sector carries a built-in lag, with loan quality often unclear for "five or six years." Manager flexibility to extend or restructure loans can smooth reported performance for several quarters, reducing pressure to act quickly.
Mercer's Systermans said redemptions reflect a liquidity issue rather than a credit quality problem, with defaults low and corporate profitability high. He added that manager selection is becoming more consequential, as performance gaps in private markets exceed those in public markets. Hadley Ma, founder of Ferghana Investment Partners, told CNBC that stress is concentrated in "large-cap, sponsored, covenant-light lending with heavy software exposure," the segment most exposed to AI-driven disruption of software businesses. Some allocators are rotating toward middle-market lending, asset-backed strategies, and deals with stronger covenants rather than exiting altogether, while fundamentals outside that segment remain broadly stable.
APG, Europe's largest pension investor, plans to raise its private markets exposure above 30% of assets and could increase its private debt allocation to between 2% and 4% from roughly 1.5% currently, according to Reuters. In the UK, Nest has committed £450m to US private credit and is targeting a 30% overall private markets allocation by 2030. In Arizona, the Public Safety Personnel Retirement System holds around 17% of its assets in private credit and aims to reach 20%, according to chief investment officer Mark Steed, who spoke to Reuters.
Proponents point to the structural logic of long-duration capital. Sebastien Betermier, executive director of the ICPM Network, a global body of more than 50 pension funds, told CNBC that large institutional investors can hold less liquid assets thanks to their "scale and long investment horizons." Olaolu Aganga, head of portfolio construction at Citi Wealth CIO, noted that allocations are difficult to unwind: commitments are signed before capital is deployed, and managers draw it gradually over several years, so a shift in sentiment does not quickly reduce exposure.
The resilience is being tested, however. Blue Owl Capital limited withdrawals in two of its non-traded business development companies after investors submitted record redemption requests. CalSTRS, a US$402bn system and Blue Owl's largest BDC investor, declined to comment on the specific situation but said it "remain[s] committed to our long-term investment strategy, including investing in private credit," spokesperson Melissa Jones-Ferguson told Reuters.
Skeptics warn of a reckoning. Johns Hopkins Carey Business School finance lecturer Jeffrey Hooke told CNBC the sector carries a built-in lag, with loan quality often unclear for "five or six years." Manager flexibility to extend or restructure loans can smooth reported performance for several quarters, reducing pressure to act quickly.
Mercer's Systermans said redemptions reflect a liquidity issue rather than a credit quality problem, with defaults low and corporate profitability high. He added that manager selection is becoming more consequential, as performance gaps in private markets exceed those in public markets. Hadley Ma, founder of Ferghana Investment Partners, told CNBC that stress is concentrated in "large-cap, sponsored, covenant-light lending with heavy software exposure," the segment most exposed to AI-driven disruption of software businesses. Some allocators are rotating toward middle-market lending, asset-backed strategies, and deals with stronger covenants rather than exiting altogether, while fundamentals outside that segment remain broadly stable.
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