Why pension funds are doubling down on private credit despite deepening cracks

Pension funds are sticking with private credit, and in some cases doubling down on allocations even as concerns mount over underwriting standards, valuation opacity and sector concentration. Institutional investors, including pension funds, "generally remain committed to the asset class, with many continuing to build out their allocations," said Cameron Systermans, head of multi-asset at Mercer Asia. New inflows into private credit vehicles by institutional investors totaled close to $300 billion in 2025, broadly steady from the prior year, according to Mercer, with redemptions being driven by retail and high-net-worth investors. For one, Europe's largest pension investor, Dutch manager APG, is planning to increase its exposure to private markets to above 30% of assets, viewing current volatility in credit markets as an opportunity to buy more, Reuters recently reported. Within that, the fund said its private debt allocation could increase to between 2% and 4% from roughly 1.5% currently. In the U.K., state-backed pension scheme Nest has committed £450 million to U.S. private credit and is targeting a sharp increase in its overall private markets allocation to around 30% by 2030 — well above industry norms. Large institutional investors have an advantage: their scale and long investment horizons allow them to hold less liquid assets. …