Who Provides The Capital Behind The Private Credit Boom? - Global Finance Magazine

Institutional investors with long-term horizons and low liquidity needs are the primary providers of capital to private credit funds, according to Global Finance Magazine. The investor base includes public and private pension funds, insurance companies and sovereign wealth funds, with insurers in particular increasing their allocations to the asset class. Institutional investors primarily seek attractive returns on capital that is locked up for extended periods, while retail participation remains a small but growing share.

U.S. pension funds are currently the largest institutional source of private credit capital. According to Securities and Exchange Commission disclosures by private asset managers, public and private pension funds held roughly 30 percent of private credit fund assets as of June 2024. The 200 largest defined benefit funds increased their private credit assets by 57.2% between 2023 and 2024. The $264 billion New York City Employees Retirement System recently said it was expanding into private credit, describing it as a "cheap asset," and CalPERS, with $503 billion in assets, raised its private credit allocation from 5% to 8%.

Sovereign wealth funds are also increasing their exposure. Temasek Holdings recently launched a private credit platform with an initial portfolio of about $7.8 billion, including direct investments and credit funds. Abu Dhabi Investment Authority and Mubadala Investment Company have invested heavily in global private credit funds and formed partnerships with major players such as KKR. According to a 2025 Invesco survey of SWF managers, 63% of sovereign wealth funds now invest in private credit funds, and half plan to significantly or moderately increase allocations.

Retail investors are being courted through publicly traded Business Development Companies, which make up nearly half of private credit loans, with Goldman Sachs and Morgan Stanley sponsoring large BDCs. Unlike closed-end private credit funds, BDCs are open-ended, and some sponsors are experimenting with evergreen and interval structures. A private credit ETF created jointly by State Street and Apollo Management launched in February. Regulators have raised concerns that this retail shift, combined with banks' growing involvement in private credit, could create a funding mismatch and risk financial system stability. The Bank for International Settlements stated that developments in funds' investor base, including the growing role of insurance companies and retail investors, "warrant monitoring."