Legal & General Investment Management’s (LGIM) private credit team is forecasting a large uptick in demand for the asset class from pension schemes.

Steve Bolton, head of corporate debt, Europe at the asset manager, highlighted defined benefit (DB) schemes in particular.

“The volume of liabilities that DB pension schemes need to find a home for is increasing,” he told Alternative Credit Investor.

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“It’s about the ability to tailor private credit for pension schemes. For example, deferred funding can be attractive as you can find an asset that doesn’t fund for six months.”

Meanwhile, Lushan Sun, private credit research manager at LGIM, said that both investment-grade (IG) and sub-IG credit hold an appeal for pension funds.

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“IG credit is good for pension schemes from a liability matching perspective,” she said.

“However, sub-IG credit offers double-digit yields and the borrower base is expanding.

“We’re seeing strong interest from the defined contribution pension market, retail and wealth channels for those types of returns.”

LGIM currently focuses on IG credit but has plans to diversify into sub-IG credit, considering areas such as impact investing and climate transition funding.

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It is also planning to expand into different geographies.

“Most of our lending is in the UK and US at the moment and a little bit in continental Europe,” said Bolton. “Expanding further into Europe is a big focus for us.”

Sun added that LGIM has “an ambition to be a truly global private markets player” and “the US is definitely a key focus” for the firm.

Asia is more challenging however as it is a “super fragmented market,” she said.