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Laxman Pai, Opalesque Asia: The fourth annual report by Gapstow on the demand for alternative credit investments among US public pension plans focuses on the calendar year 2020 and therefore captures the significant impact of COVID-19 on investment decisions.
According to the report, net flows to alternative credit investments in 2020 were a remarkable 9.9% which is, by far, the largest annual increase in our survey's history.
"Not surprisingly, we attribute much of this growth to opportunistic allocations made after the dramatic market sell-off in March 2020. For example, net flows to Distressed strategies were 19.2%," the report said.
Pension plans in our sample (collectively) have 7.9% of their total assets invested in alternative credit, and many plans now have double-digit allocations, reflecting the broader adoption of credit as a systematic asset class.
Pension plans with larger allocations to alternative credit generally have smaller allocations to traditional fixed income, which is evidence of substitution of the former for the latter.
"We expect alternative credit allocations to continue growing because many plans remain under-allocated relative to their policy objectives, and others are increasing their target allocations," the report said.
"We conclude by discussing the significant implications that these findings have for the investment management industry," it added.
Alternative credit managers must enhance their business models to addres...................... To view our full article Click here
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