Large North American pension funds including the California State Teachers’ Retirement System (CalSTRS) are maintaining their exposure to private credit, signalling continued confidence in the asset class even as the sector faces mounting headwinds, according to a report by Reuters.
CalSTRS is continuing to back private credit strategies, adopting a long-term approach despite recent volatility and liquidity pressures affecting some funds. The pension giant has exposure to vehicles managed by Blue Owl Capital and remains a significant investor in its listed business development company, Blue Owl Capital Corp.
The stance comes as parts of the market face rising redemption requests, prompting some managers to limit withdrawals. Concerns have been building around increased competition, tightening returns, and the potential impact of artificial intelligence on software borrowers—a key segment for many private credit portfolios.
Despite these challenges, pension funds—typically long-duration investors—appear willing to ride out near-term volatility. Allocations remain substantial across the sector, with some US retirement systems holding mid- to high-teen percentage exposures, and in certain cases approaching 20% of total assets.
In Arizona, the Public Safety Personnel Retirement System is targeting a 20% allocation to private credit, up from roughly 17% currently. While acknowledging that capital inflows have intensified competition and weakened underwriting standards, the fund still sees a durable role for the asset class, albeit with expectations of a market shakeout.
Similarly, the State Teachers Retirement System of Ohio continues to build out its direct lending and co-investment exposure, with private credit expected to account for around 10% of assets through its current fiscal period.
In Canada, the Healthcare of Ontario Pension Plan expressed cautious optimism, noting that while recent performance has been mixed, opportunities remain on a selective basis.
Meanwhile, the Los Angeles County Employees Retirement Association highlighted the ongoing role of credit strategies in delivering income and diversification over the longer term, even as short-term returns have softened.
