US pension funds are underallocated to private debt, according to S&P Global Market Intelligence data.

The analysis found that out of 118 US pension funds, 77 remain underallocated, 34 exceed their targets and seven match their targets.

The median target allocation is $175.5m (£141.4m) versus a median actual allocation of $147.5m, indicating an aggregate underallocation of $28m as of 3 January.

However, the research also noted that pension funds as a group have increased exposure to private debt since August 2024, when the net underallocation was $76m.

The California Public Employees’ Retirement System (CalPERS) recorded the largest underallocation to private debt among US pension funds, falling $25.72bn short of its target.

However, it remains the largest allocator to the asset class out of the group analysed, at $16.36bn.

Read more: Calpers looks to boost “under resourced” private debt team

Meanwhile, the Pennsylvania Public School Employees’ Retirement System had the highest over-allocation to private debt, with $5.99bn invested – $1.50bn above its target.

A strong performance in public markets has led institutional investors such as pension funds to rebalance their portfolios, sometimes resulting in an underallocation to private debt.

Read more: Preqin: UK pensions allocate almost a quarter of AUM to alternatives

But pension funds are broadly expected to increase their allocations in the coming years.

A recent survey by CREATE-Research and Amundi of 157 global pension plans found that 86 per cent expect to be invested in private markets within the next three years. Private debt and private equity were highlighted as the key areas of interest.