February 14, 2023 | Stamford, CT — Institutional investors are not letting the dramatic shift in interest rates and the macroeconomic environment dampen their enthusiasm for private credit.

Driven by a combination of investor interest and companies’ need to seek alternative funding, global private credit grew more than six fold since the global financial crisis, surpassing $1.3 trillion in 2022. However, soaring yields and worries about a downturn in the economy could represent the first real test of the surging market for private credit. 

“Despite those concerns, more than half of institutional investors that currently invest in private credit are sticking with plans to increase allocations to the asset class, and over 40% plan to expand their manager rosters in the next 3 years,” says Mark Buckley, Head of Investment Management at Coalition Greenwich.

According to new research, The State of Play in Institutional Investors' Use of Private Credit, from Coalition Greenwich, about 55% of institutional investors in North America, the United Kingdom and Japan now invest in private credit, as do a third of those in continental Europe. Around the world, more than 1 in 10 non-users have plans to start investing in private credit, despite changes in the macro environment. 

In North America, institutional investors in private credit favor distressed and real estate debt, while direct lending and infrastructure are among the top picks for Europe and Japan. In Europe, nearly 70% of institutional investors also view ESG as an important consideration when allocating private credit investment

“The next six months will provide some valuable perspective on the performance and resilience of what many institutional investors see as a new and less familiar asset class,” says Mark Buckley.