Institutional Investors Continue Allocations Despite Private Credit Headlines

Despite a surge in defaults, regulatory scrutiny, and high-profile restructuring headlines, institutional investors remain highly committed to private credit. The structural drivers of the asset class — including bank regulatory capital requirements and corporate borrower demand for bespoke financing — continue to fuel long-term growth projections. According to PwC's Global Private Credit Fund Survey 2026, released in late May 2026, the industry is projected to grow from its current $2 trillion in assets under management (AuM) to $3.4 trillion globally by 2030.

Strong Allocation Intentions

The PwC survey, which captured insights from over 120 credit portfolio managers across the U.S., UK, Europe, Middle East, Asia, and Australia, highlights robust institutional investor appetite:

• 81% of managers expect to receive increased allocations over the next 12 months.
• 44% of managers expect those allocations to increase by more than 20%.

This resilient fundraising outlook stands in sharp contrast to the negative headlines. Many giant state pension funds — including those in California, Arizona, Kentucky, Virginia, and other states — maintain significant private credit exposure and appear committed to maintaining or expanding their allocations.

Portfolio Managers' Outlook on Defaults

While regulators sound alarms, private credit portfolio managers themselves express a high degree of confidence about their underwriting. The PwC survey revealed that:

• More than half of surveyed credit portfolio managers are "not concerned at all" or "only slightly concerned" about an increase in defaults over the next one to two years.
• Less than 20% of managers expressed serious concern about rising defaults.

Instead of a broad systemic collapse, managers view rising defaults as a localized and manageable trend. They expect stress to be concentrated in specific sectors over the next 12 to 24 months:

• Consumer and retail: 56% of managers expect acute stress here.
• Automotive: 42%
• Hospitality and leisure: 27%
• Technology: 24%

Competition Overriding Default Concerns

For most managers, the primary threat to performance is not credit defaults, but rather the intense competition for high-quality deals. Two-thirds (67%) of respondents cited greater competition as the primary driver impacting fund performance in 2026, followed by credit defaults and losses (64%).

This intense competition is driving margin compression and forcing managers to put a greater emphasis on investment selection, downside protection, and operational efficiency, including the adoption of technology in underwriting.