Institutions Managing $8 Trillion Say They "Will Increase Alternative Credit Investment This Year"

Survey by global manager BSP
Broader portfolio diversification... strong preference for infrastructure debt
Europe and Asia-Pacific show stronger "home bias"

More than half of institutional investors worldwide plan to increase their allocation to alternative credit this year. As the benefits of portfolio diversification combine with expectations of returns exceeding those of traditional bonds, alternative credit is steadily establishing itself as a core asset in institutional portfolios.

According to the "2026 Alternative Credit Survey" recently released by Benefit Street Partners (BSP), a global alternative credit specialist asset manager, 51% of institutional investors responded that they "will increase their allocation to alternative credit this year." When combined with those who said they would maintain their current allocation (41%), a total of 92% are planning to keep their investment at or above the current level.

Alternative credit refers to fixed-income-like investments made in private markets rather than in traditional bond products such as bank loans or government bonds. It includes private lending, infrastructure debt, and real estate-backed loans. While investors can expect relatively higher returns, these assets are less liquid than equities or publicly offered bonds.

Diversification and higher-return expectations make infrastructure debt the top pick

The main drivers behind the planned increase in investment were cited as portfolio diversification benefits (85%) and expectations of higher total returns compared with traditional bonds (81%). The survey also found that institutions already having a high allocation to alternative credit are more likely to pursue additional investments.

Among specific investment segments, infrastructure debt stood out as the most favored. Among respondents planning to increase their allocation, 47% selected infrastructure debt, and it was also viewed as the most attractive opportunity over the next three years (53%). This was followed by direct lending (39%), asset-based lending (35%, loans secured by real assets such as real estate, equipment, and accounts receivable), and special situations (30%, strategies that invest in corporate restructurings, distressed assets, and other event-driven opportunities).

Regarding the current interest-rate environment, the share of respondents viewing it as an opportunity (47%) was roughly double that of those seeing it as a risk (23%). Sentiment toward the mergers and acquisitions (M&A) and leveraged buyout (LBO, an acquisition structure that relies heavily on external borrowing to finance the deal) environment was also notably positive, with 45% viewing it as attractive versus only 5% holding a negative view, indicating broadly upbeat expectations for the macroeconomic backdrop.

Geopolitics and security concerns drive "home-first" investment preferences

By region, the United States continues to hold its position as the largest market, accounting for 65% of total alternative credit assets. However, a clear "home bias" trend is emerging among investors in Europe and the Asia-Pacific (APAC) region, meaning a growing preference for their own domestic markets. As of 2025, 51% of European investors increased allocations within Europe, while only 21% increased their exposure to the United States. In APAC as well, the share of investors expanding allocations within the region (34%) is narrowing the gap with those increasing allocations to the United States (37%).

Changes are also being observed in fund structures. Currently, 71% of institutions use traditional closed-end funds, but this figure is expected to fall to 59% over the next 12 months. By contrast, the use of evergreen funds (open-ended vehicles with no fixed maturity that allow subscriptions and redemptions on an ongoing basis) is projected to rise from 33% to 42%. The share of institutions managing public credit and private credit separately is also expected to decline from 64% to 41% over the next five years, with integrated management approaches likely to become more prevalent.

Allison Davi, Co-Chief Operating Officer (Co-COO) at BSP, said, "As most global investors anticipate expanding their allocations to alternative credit, portfolio construction is becoming increasingly sophisticated," adding, "Investors are seeking broader diversification across product types, investment regions, and fund structures, and we are seeing a tendency to build long-term, in-depth relationships with asset managers to achieve this."

She added, "Managers that can offer an appropriate scale, a proven performance track record, and capabilities across a wide range of sub-asset classes, while also providing a flexible, client-centric approach, will be the ones to secure a competitive edge."

The survey was conducted among 135 investment professionals at institutions such as pension funds, mutual aid associations, and insurance companies across North America, Europe, the Middle East and Africa (EMEA), and the Asia-Pacific (APAC) region. The total assets under management of these respondents amount to 8 trillion dollars (approximately 11.6 quadrillion won).