Majority of LPs Plan Integrated Credit Strategies Over Next Five Years
A survey of 135 senior investment professionals at asset owners across North America, Europe, APAC, and the Middle East found that 59% of global limited partners (LPs) expect to adopt a more integrated approach to their public and private credit allocations within the next five years, according to research from Benefit Street Partners. This figure represents an increase from 35% of LPs currently taking such an approach. The research, which involved asset owners with a combined assets under management of $8tn, highlights the growth of private credit as a factor leading to overlap with public markets through shared borrowers, risk profiles, and co-investments.
Survey Details and LP Expectations
Benefit Street Partners’ research indicates that private credit has become a core pillar of institutional portfolios, prompting LPs to explore more holistic management of their credit allocations. Specifically, 19% of LPs expect to achieve full public-private credit integration in their portfolios over the next five years, up from 5% today. Additionally, 40% of LPs anticipate being in the process of adopting a more integrated approach during this period, compared to 30% currently, according to Private Equity Wire.
Barriers to Achieving Integration
While LPs are moving toward integration, the research identifies significant challenges, with 65% of respondents citing liquidity mismatch as a key barrier to unifying the management of public and private credit portfolios. Another 52% highlighted issues related to transparency in underlying assets and pricing as major obstacles. These concerns were more prominent than other factors, such as the reluctance of internal teams to merge, noted by 19% of respondents, and the lack of appropriate governance structures and processes, cited by 17%.
Implications from the Research
The findings underscore that LPs are actively addressing the practical issues in credit allocation convergence, as private credit’s expansion continues to influence portfolio strategies. According to Private Equity Wire, this research reflects broader trends in institutional investing where integration efforts are gaining momentum despite hurdles.
