The majority of limited partners (LPs) continue to view alternative credit as an attractive asset class, with more than half planning to increase allocations, despite high-profile scrutiny of the sector, a recent survey has found.
A study by Benefit Street Partners (BSP), a Franklin Templeton company, found that the vast majority (92 per cent) of global institutional investors, LPs, intend either to increase (51 per cent) or maintain (41 per cent) their alternative credit allocations in 2026.
Among those boosting investment in the asset class, 47 per cent plan to increase their exposure to infrastructure debt, followed by direct lending (39 per cent), asset-based lending (35 per cent), special situations debt (30 per cent) and commercial real estate debt (28 per cent).
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Alongside this, the survey showed a growing trend for investors to allocate to evergreen vehicles to access the asset class, with the use of these vehicles set to surge from 33 per cent to 42 per cent. While separately managed accounts or fund-of-fund structures are expected to rise from 34 per cent to 40 per cent.
The main motivations for increasing allocations to the asset class were portfolio diversification and the potential for higher total returns compared with traditional fixed income, the study found.
The research by BSP surveyed 135 investment professionals at asset owners across North America, EMEA and Asia-Pacific (APAC), with a combined assets under management of $8tn (£5.8tn).
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BSP also found widespread appetite from LPs for broader exposure across geographies and sub-asset classes.
In Europe, 51 per cent of investors increased their European allocation in 2025, versus just 21 per cent increasing their US allocation. In APAC, 34 per cent of investors increased their APAC allocation. While this narrowly lags the US, at 37 per cent, it is significant in the context of the relatively small size of domestic APAC alternative credit markets, BSP said.
“While most global investors look set to increase allocations to alternative credit, they are getting more sophisticated in how they curate their portfolios,” said Allison Davi, co-chief operating officer at BSP. “They want greater diversification in terms of product set, geographic exposure and fund structuring, and they want fewer, deeper relationships with managers to deliver this.”
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