-

KBRA Releases Research – Pension Funds Increase Their Allocations to Private Credit

NEW YORK--(BUSINESS WIRE)--KBRA releases a report examining the trend of large U.S. public sector pension funds increasing their investment allocations to private credit, a growing asset class within the larger arena of alternative investments.

Private credit offers pension funds several positive attributes, including higher yields than traditional fixed income, that can provide longer-term benefits if the liquidity shortcomings of this asset class are prudently addressed. Moreover, in terms of environmental, social, and governance (ESG) considerations, there are both challenges and opportunities in this sector. Private credit can effectively target specific ESG investments, but the process of obtaining broader ESG data from the smaller, less well-resourced borrowers is still evolving.

Key Takeaways

  • The asset class of private credit is growing, as is its role in the investment portfolios of public sector pension funds.
  • Private credit generally has higher yields than the traditional fixed income investments of pension funds, such as publicly traded U.S. government obligations and taxable investment-grade corporate debt.
  • The prevalence of floating interest rates is also beneficial in an escalating interest rate environment.
  • Private credit is less liquid, which needs to be factored into the allocation decisions of pension fund managers.
  • There can be good access to ESG-focused investments such as renewables projects, but it is difficult to obtain more extensive ESG data from the underlying borrower base.
  • The manager-selection process for private credit funds is important, and pension funds need to develop and maintain the requisite expertise.
  • KBRA’s extensive involvement across the private credit markets provides a comprehensive view of the trends, challenges, and opportunities in this sector, as well as the risks presented by a slowing economy, rising interest rates, and persistent inflation.

Click here to view the report.

Related Publications

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

Contacts

Contacts
Paul Kwiatkoski, Senior Advisor
+1 (646) 731-2387
paul.kwiatkoski@kbra.com

Karen Daly, Senior Managing Director
+1 (646) 731-2347
karen.daly@kbra.com

Business Development Contact
Bill Baneky, Managing Director
+1 (646) 731-2409
william.baneky@kbra.com

James Kissane, Senior Director
+1 (213) 806-0026
james.kissane@kbra.com

KBRA

Details
Headquarters: New York City, New York
CEO: Jim Nadler
Employees: 400+
Organization: PRI

Release Versions

Contacts

Contacts
Paul Kwiatkoski, Senior Advisor
+1 (646) 731-2387
paul.kwiatkoski@kbra.com

Karen Daly, Senior Managing Director
+1 (646) 731-2347
karen.daly@kbra.com

Business Development Contact
Bill Baneky, Managing Director
+1 (646) 731-2409
william.baneky@kbra.com

James Kissane, Senior Director
+1 (213) 806-0026
james.kissane@kbra.com

More News From KBRA

KBRA Releases Research – The Geography of Auto Loan ABS Performance

NEW YORK--(BUSINESS WIRE)--KBRA releases research examining state-level auto loan ABS performance across the U.S. Most auto ABS transactions are geographically diversified, limiting the impact of any single state on overall deal performance. However, geographic differences may be more relevant for whole-loan buyers and for securitizations with outsized concentrations in states performing meaningfully above or below expectations, particularly when those concentrations differ from a shelf’s histo...

KBRA Assigns Preliminary Ratings to PRKCM 2026-AFC6 Trust

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to 10 classes of mortgage-backed notes issued by PRKCM 2026-AFC6 Trust, a $327.8 million non-prime RMBS transaction. The underlying collateral consists of 793 residential mortgages, with fixed-rate mortgages (FRMs) and hybrid adjustable-rate mortgages (ARMs) representing 98.4% and 1.6% of the pool, respectively. The transaction includes a meaningful concentration of collateral that KBRA considers non-prime. All of the loans were origin...

KBRA Assigns Preliminary Ratings to Reach ABS Trust 2026-3

NEW YORK--(BUSINESS WIRE)--KBRA assigns preliminary ratings to five classes of notes issued by Reach ABS Trust 2026-3 (“Reach 2026-3”), an unsecured consumer loan ABS transaction. Credit enhancement consists of overcollateralization, subordination of junior note classes (except for the Class E notes), a cash reserve account funded at closing, and excess spread. This transaction represents Reach Financial, LLC’s (“Reach”, the “Servicer” or the “Company”) third term ABS securitization in 2026 and...
Back to Newsroom