Top pension funds increase private debt investments by 24pc
The top quartile of US pension funds increased their allocations to private debt funds by 24 per cent last year, according to new data by Preqin.
Between 2022 and 2023, US public pension plans increased their collective investments in private debt from $146m (£116.21m) to $182m, a 24 per cent rise.
In the overall US public pension plan universe, private debt allocations increased by 7.4 per cent over the same period.
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By the end of 2023, US public pensions held almost $5.9tn. Approximately 30 per cent of theses funds were invested in alternatives such as private debt funds.
However, the private debt boom contrasts with a downturn in alternatives fundraising from US public pensions. Preqin found that US public pension plans are committing less capital to fewer funds overall.
“The recent downward trend in fundraising is likely temporary, and there is little evidence that pension plans are lowering their targets to alternative assets,” said Charles McGrath, assistant vice president, research insights at Preqin.
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“That said, the average allocation has appeared to have found an equilibrium with private assets at around 30 per cent, a figure that has changed little over the past decade, making it unlikely that new capital-raising opportunities will come from a material increase to policy targets.”
Preqin’s report found that the global financial crisis was the catalyst for many US pension funds ramping up their investments in alternatives. However, the research firm warned that overallocations are putting pressure on managers’ fundraising.
As of March 2024, US pension funds had an average target allocation to alternatives of 30.6 per cent, while average actual allocations were 33.4 per cent, resulting in an overallocation of 2.8 per cent.
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