02.15.22

Pension Funds Chase Returns in Private-Market Debt

by: Heather Gillers

Retirement funds are clamoring to invest in private-market loans, hungry for an asset that can beat public markets while at the same time throwing off cash to help pay benefits. Across the United States, state and local retirement funds with private-credit portfolios are expanding them faster than any other alternative investment, from an average allocation of 3 percent to an average target of 5.7%, according to analytics company Preqin. For decades, U.S. pension funds have been scaling back on bonds and other types of publicly traded debt as yields dropped. Michael Lombardi, director of credit at the $280 billion New York State Common Retirement Fund, said that he expects to hit the 4% allocation target set in 2020 by the end of this year. U.S. pension funds’ private-credit holdings now amount to tens of billions of dollars.

Read the full article on Wall Street Journal