As banks continue to pull back on lending, the Canada Pension Plan Investment Board, the Ontario Teachers’ Pension Plan, the Ontario Municipal Employees’ Retirement System and the OPSEU Pension Trust are increasing their exposure to private credit, according to reporting by Reuters.
The CPPIB, which manages $576 billion, said it will double its overall credit portfolio to around $115 billion over the next five years, said Andrew Edgell, the CPPIB’s senior managing director and global head of credit investments, adding private credit is a key part of the expansion. The pension fund manages most of its C$62 billion credit book in-house. As well, the OPTrust said it expected to grow in private credit in Europe, including in Britain.
Private credit has become popular among pension schemes and insurers because it offers higher returns than traditional fixed-income products and typically better downside protection than equities, said the report. Indeed, the Ontario Teachers’ and the OPTrust both told Reuters they saw opportunities to plug gaps left by banks and the OMERS said it sought the kind of opportunities across credit markets, including in private credit, that it hadn’t seen “in many years.”
“Private credit is an attractive product right now, and the structural shift from banks to private lenders continues,” said Nick Jansa, executive managing director at the Ontario Teachers’ for Europe, the Middle East and Africa.
The value of global private debt assets under management is expected to jump to US$2.8 trillion by 2028, according to a report by Preqin Ltd. As well, a recent report by Ninepoint Partners showed Canada’s largest pension plans had rapidly increased exposure to private credit in 2023.