Retail redemptions fail to dent asset owner private credit appetite
Asset owners continue to commit to private debt despite wider concerns surrounding the asset class (Tanya Barrow/Unsplash)
Good morning. You might recall that towards the end of last year we looked into the amount of money flowing in and out of private credit, as reported by our sister publication MandateWire.
Well, a lot of water has passed under a lot of bridges since then. For example several private credit funds have been hit with waves of redemptions from retail investors.
So we thought it would be interesting to see what has happened in the intervening months and whether things have slowed down.
The short answer is ‘no’. Money from asset owners is still, on a net basis, flowing into private credit - particularly in Europe.
It’s worth remembering that due to the time lag of deals filtering through, the numbers for Q2 2026 will almost certainly go up – particularly since the quarter hasn’t finished yet.
Also, the massive spike in IMEA in Q2 2025 is due to Abu Dhabi’s sovereign wealth fund Mubadala making one massive investment with a US asset management company.
Likewise the net outflows seen in the US in Q1 2025 is because the Florida State Board of Administration sold two large private debt positions.
But the headline is that trepidation about private credit seem largely confined to retail investors and not to asset owners.
Nick Cooney, a partner at consultancy LCP, says the questions he was getting from clients were around BDCs - a type of closed-ended fund generally used to invest in private credit.
But he says: “In practice a lot of our clients aren’t invested in those.”
He says it is “a concern” that the general consensus towards private credit is so negative but he adds that the biggest impact so far had not been on the asset owner side, but on the fund manager side.
Cooney says: “We’ve seen a real reduction in the number of funds coming to market and amount of capital raised.”
He also says there had been an increase in the amount of dry capital - i.e. capital that has been raised by private credit funds from asset owners but that has not yet been invested in any actual assets.
Constantine Braswell, vice president in Callan's alternatives consulting group, says: “Our clients aren’t necessarily nimble enough to say ‘let's change our target allocation to private credit’.
“Overall the big concern is the sheer amount of competition in direct lending and I attribute that to the massive inflow from retail investors.
“For the clients I work with, the opportunity set is so vast that we can find a fit for what they are looking for.”
