Aeon Investments: more institutional allocation to private debt

November 1, 2023

Nearly three-quarters of institutional investors will increase their allocations to private debt and structured credit in the next 12 months.

New global research with pension funds, insurance asset managers, family offices and wealth managers, who collectively manage around $ 545 billion, shows just under a quarter (24%) of those will increase allocations to private debt dramatically in the next year, while half say they will slightly increase allocations. Also, 16% will keep allocations the same, while 9% plan to decrease their holdings, according to Aeon Investments today, based on their research.

‘Meanwhile, 22% of respondents say they will dramatically increase investment in structured credit, while 49% will make slight increases over the next 12 months. One-quarter will keep their allocations the same while 3% plan to decrease investments,’ the company continues.

‘When asked to select their three main reasons for increasing allocations to private debt, 59% selected an improved regulatory environment. This was followed by more choice for investors (58%), greater innovation in the private debt investment market (54%), and attractive yields and increasingly appealing risk-adjusted returns (53%).

More than three-quarters (77%) of investors say private debt will become more appealing over the next two years because the asset class’s defensive characteristics contribute to risk management in times of market distress.

The majority (85%) of respondents expect the regulatory environment to continue to move favourably for private debt markets, with one-quarter expecting significant improvements while 60% expect slight progress.

Nearly all (93%) investors agree that the bespoke nature of fixed income/credit means it is easier for investors to make a positive social and environment impact.’