News Digest: Pension plan portfolios continue to rely on private credit
February 13, 2023
Pension plans’ reliance on private credit continued with assets of 200 of the largest such plans growing by 12.5% to $98 billion over the twelve months ended September 30, says a published report. This despite the fact that some asset owners reported falling portfolios during this period.
Rising interest rates are expected to benefit private credit managers with floating-rate debt though there could be a large number of LPs that could be less than pleased about the returns of the current funds because of these very rates.
Cash flows and interest payments of enterprises get affected by rising interest rates, The Cliffwater Direct Lending index that represents $260 billion in private credit assets, returned 6.6% for the twelve months ended September 30, as against 14.25% a year ago. Credit managers with fixed-rate loan portfolios that fail to adjust to interest rate hikes have seen a drop in returns over the past year.