Almost half of global limited partners (LPs) intend to increase their allocations to infrastructure debt in 2026, making it the most popular alternative credit sub-asset class, according to new research.
Research by Benefit Street Partners (BSP), a Franklin Templeton company, found that 51 per cent of global LPs intend to increase their alternative credit exposure in 2026 as a result of portfolio diversification.
Among those, 47 per cent plan to increase their exposure to infrastructure debt, outpacing direct lending at 39 per cent.
Just seven per cent expect to decrease their infrastructure debt allocation, the lowest figure of all sub-asset classes, compared with collateralised loan obligations (CLOs) at 10 per cent, direct lending at 11 per cent and commercial real estate at 17 per cent.
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“As LPs pursue greater diversification and broader alternative credit exposure, we’re seeing significant interest in infrastructure debt as a reliable, long-term source of income with strong defensive qualities”, said Will Devenney, managing director and head of infrastructure debt at Benefit Street Partners. “Through predictable cashflows, high barriers to entry and investment in essential assets, infrastructure debt offers stability during periods of heightened volatility, proven through periods like the global financial crisis, Covid and other periods of macroeconomic stress.”
The research surveyed 135 senior investment professionals at asset owners across North America, Europe, Asia-Pacific and the Middle East, with a combined $8tn (£5.9tn) in assets under management.
The focus on infrastructure debt comes as LPs expect it to deliver the strongest risk-adjusted returns over the next three years. Some 53 per cent of LPs cited infrastructure debt, placing it above asset-based lending, direct lending, CLOs, special situations and commercial real estate debt, the survey revealed.
BSP found that interest towards infrastructure debt is higher among insurers and pension funds, with 54 per cent and 50 per cent respectively intending to increase their allocations towards the asset class.
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Overall, limited partners favoured asset-based lending at 35 per cent, special situations debt at 30 per cent and commercial real estate debt and 28 per cent.
Devenney added: “Critically, infrastructure debt offers direct exposure to two seismic, interconnected themes: demand for digital infrastructure and energy security. Data centre investments alone, where the two intersect, are projected to reach $7tn by 2030, meaning investors can capture this opportunity with strong downside protection.”
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