Investors favour private credit over other alternatives

44 per cent of institutional investors plan to increase their allocations to private credit in the next 12 months, the greatest increase of any alternative strategy.

In comparison, 27 per cent of respondents said they planned to increase their target allocation to infrastructure and 25 per cent are looking to invest more into alternative assets overall or private equity. Real estate was highlighted by 17 per cent, while just two per cent of investors plan to increase their target allocation to hedge funds.

Secondary market investor Coller Capital surveyed 110 private markets investors from around the world as part of its latest Global Private Equity Barometer, who oversee an aggregate minimum of $2.2trn (£1.75trn) in assets under management.

Read more: ‘Megatranche’ private credit loans on the rise

45 per cent of investors surveyed said that higher interest rates have had a positive impact on the performance of their private credit portfolios, compared to 19 per cent who said higher rates have had a negative impact.

“This may demonstrate both the ability of private credit managers to continue deploying and generating returns in constrained environments, more so than other lenders, as well as showing the benefits felt by those invested in floating rate-linked lending strategies,” Coller Capital said.

Looking ahead, 76 per cent of investors said they think private credit managers will lend at a faster pace than banks in the next one to two years, indicating the continued growth of private credit as an asset class, as it gains market share against traditional lenders.

Read more: BoE: Private credit vulnerable to macroeconomic shifts

“The latest edition of the Global Private Equity Barometer reinforces that private credit has solidified its position within private market portfolios,” said Jeremy Coller (pictured), chief investment officer of Coller Capital.

“In current conditions, private credit is one of the most compelling sources of growth for investors when deployed well.

“Investors are drawn towards private credit for its ability to generate returns, particularly in a constrained environment. Despite fundraising tailwinds for credit, the industry must ensure that it deploys that capital responsibly with the same rigorous assessment and diligence that has made the asset class a success.”

Read more: Private credit returns beat private equity