Private credit set for largest target allocation growth among alternatives
Private credit is set for the largest target allocation growth among alternative assets over the next 12 months, with senior direct lending seen as the most attractive opportunity in the sector.
Secondaries investor Coller Capital surveyed 110 limited partners (LPs) worldwide that invest in private capital and collectively oversee $2.1tn (£1.7tn) in assets under management.
Its Global Private Capital Barometer found that 45 per cent of LPs expect to increase their target allocation to private credit in the upcoming year. Secondaries was the asset class with the second-highest allocation increase, with 38 per cent of investors planning to put more funds into the strategy.
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One third of respondents said they are expecting to increase their allocations to infrastructure (33 per cent) and private equity (31 per cent).
Among credit opportunities, 70 per cent of respondents see senior direct lending as a more attractive investment than other forms such as mezzanine lending (58 per cent) and syndicated loans (36 per cent).
And 38 per cent of LPs intend to boost their portfolio exposure to direct lending in the next two to three years.
“Continued retreat from traditional lending, along with a conducive interest rate environment that provides conditions for attractive returns and compelling downside protection – an attribute of the strategy – can be expected to support the strategy’s growth,” the report said.
“This was particularly evident among APAC LPs, with over 50 per cent planning to increase their weighting, reflecting a trend that might align with private credit’s current stage of development across the APAC region.”
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The report also revealed that 61 per cent of LPs expect to make first commitments to new managers in private credit over the next 12 to 24 months.
“These findings are a huge vote of confidence for alternative assets,” said Jeremy Coller, chief investment officer and managing partner of Coller Capital.
“LPs stand ready to not just maintain their allocations but to actively increase them as they seek attractive, long-term risk adjusted returns. Nowhere is that clearer than in private market secondaries, where LPs have seen the diversification and liquidity on offer.”
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