How investors have embraced private debt

Recent years have seen some of the largest LPs in the world significantly increase their allocations to private debt. Private Debt Investor has tracked commitments via its annual Global Investor rankings of the largest allocators to private debt. The GI rankings – see overleaf for the 2022 GI 50 list – are based on the fair value of investors’ private debt investment portfolios at a single point in time.

TIAA was the largest LP in private debt in our inaugural GI 30 in 2019 with $30 billion allocated to the asset class, but its allocation grew rapidly to $113 billion by 2022 when our ranking was expanded to become the GI 50. This was not even the largest allocation, with MetLife topping the table with a huge $153 billion allocated to the asset class, more than 30 percent of its total allocation.

So what have we learned from the Global Investor rankings since we started compiling the figures in 2019? Here are six key takeaways:

1. Public pensions are a growth area 

One point that is clear: there is room for growth in the contribution of public pensions to this space. Although in 2022 two-thirds of the institutions on the list were public pensions, their investments represent only one-third of the total allocation to private debt: that fraction may well rise in the years to come.

2. North America rules the roost

The business of investing institutional money in private debt remains a North America-centred affair. In 2019 the only one of the top five that was not headquartered in either the US or Canada was fifth-placed AXA Investors from France. In 2022 fourth-place Allianz from Germany was the only one not headquartered in North America. The top rankings have also been remarkably consistent, with TIAA topping the list in 2020 and 2021 before being displaced by MetLife in 2022. The investor list is a reminder of the importance of insurer money. Indeed the top four in 2022 were all insurers: MetLife, TIAA, Manulife Financial and Allianz Real Estate. 

3. The 30% club

The top two in 2022 – MetLife and TIAA – both have private debt allocations of above 30 percent of their portfolios – showing bold levels of support for the asset class. Asked about investor interest in the private debt space generally, Jeff Abrams of ORIX USA, an alternatives manager with AUM of $27.4 billion, said that there is a broad range of investor attitudes encompassing both the bulls and bears: “I would call it a mixed bag. You have to look at each institution and what its mandate is. Some institutions have the flexibility to be opportunistic. But others are cautious, and still others have their hands tied.” 

4. The attraction of a multi-strategy approach

CPP Investments, fifth-placed in the latest GI 50, won PDI’s Investor of the Year (Americas) award this year helped by its “multi-strategy credit platform” and investments in both public and private, as well as in primary and secondary markets. The award is a reminder that private debt is increasingly seen by LPs as a key ingredient in a cross-asset strategy. CPPIB, headquartered in Toronto, has been highly consistent in its allocations over the years, with levels varying between 5 percent and 7 percent of its portfolio over the last four years.

5. The return of Australia

The 2022 GI50 marked the return of Australia to the ranking. Two of the country’s superannuation funds, The Australian Future Fund and AustralianSuper, featured at 21 and 22 in the original GI30 list in 2019 and these both re-entered the rankings this year, along with two other Australian LPs, Australian Retirement Trust and Victorian Funds Management Corporation. They are tipped to go higher in future lists, especially AustralianSuper which plans to ramp up its exposure to private debt over the next three years.  

6. Consistency from the Asia-Pacific champion

The rankings are less about flux and more about steadiness and stability, with Singapore-based sovereign wealth fund Temasek taking the award for consistency. Tenth in the first three lists, it moved up to ninth on the 2022 GI 50. Temasek is the only Asia-Pacific institution to rank so high. Incorporated in 1974 to hold and manage assets previously owned by the government of Singapore, it is now the grandparent of the sovereign wealth funds as an institutional class, allocating 4 percent of its portfolio to private debt through the whole 2019-22 period.