Pension Funds Allocated Nearly $300 Billion to Private Credit in 2025, Roughly Matching 2024

Institutional investors allocated close to $300 billion in new capital to private credit vehicles in 2025, roughly in line with the prior year, according to Mercer. Redemptions in the asset class that year were driven by retail and high-net-worth investors rather than institutions. Institutional investors including pension funds generally remain committed to private credit.

Many are continuing to build out their allocations, Cameron Systermans, head of multi-asset at Mercer Asia, said. Europe's largest pension investor, Dutch manager APG, is planning to increase its exposure to private markets to above 30% of assets. 5% currently.

U.S. private credit. Nest is targeting an overall private markets allocation to around 30% by 2030. The California State Teachers' Retirement System holds investments in private credit funds managed by firms including Blue Owl Capital.

Blue Owl Capital has capped redemptions at some funds. Pension funds typically allocate low- to mid-single-digit percentages of their portfolios to private credit, according to Mercer. Broader private markets exposure for some funds can be higher.

," said Sebastien Betermier, executive director of the ICPM Network. " Banks facing tighter capital requirements have reduced their exposure to the private credit market. This shift has helped draw greater attention from pension funds with long investment horizons suited to less liquid assets.

"Redemptions appear to be more of a liquidity issue than a solvency or credit quality issue, with defaults remaining low, underlying leverage stable and corporate profitability high," said Cameron Systermans. "The stress in the headlines is concentrated in a specific part of the market: large-cap, sponsored, covenant-light lending with heavy software exposure," said Hadley Ma, founder of private credit firm Ferghana Investment Partners.

Some allocators are increasingly rotating within private credit toward middle-market lending, asset-backed strategies and deals with stronger covenants.

"Private market asset allocation is set up in a way that commitment letters are signed after the allocation is determined," said Olaolu Aganga, head of portfolio construction at Citi Wealth CIO. This structure makes allocations long-term and difficult to unwind quickly.

Cnbc reported that pension funds are structurally better-suited to hold illiquid assets due to their long-term liabilities, which resemble long-duration bonds.

Their scale allows them to harvest an illiquidity premium unavailable in public markets.