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New global research from Aeon Investments, the London-based credit-focused investment company, with pension funds, insurance asset managers, family offices and wealth managers who collectively manage around $545 billion, shows just under a quarter (24%) will increase allocations to private debt dramatically in the next year, while half say they will slightly increase allocations. Sixteen percent will keep allocations the same, while 9% plan to decrease their holdings.

Meanwhile, 22% of respondents say they will dramatically increase investment in structured credit, while 49% will make slight increases over the next 12 months. One-quarter will keep their allocations the same while 3% plan to decrease investments.

The story is similar over a three-year horizon. Seventy-one percent will increase allocations to private debt, while 68% will up their investments in structured credit. Almost all (94%) investors agree that credit offers a 'compelling investment case in an absolute sense' during the current economic downturn by offering attractive returns when equities are in decline. Two-fifths of respondents strongly agree, while half slightly agree with this view.

When asked to select their three main reasons for increasing allocations to private debt, 59% selected an improved regulatory environment and this was followed by more choice for investors (58%); greater innovation in the private debt investment market (54%); and attractive yields and increasingly appealing risk-adjusted returns ((53%).

More than three-quarters (77%) of investors say private debt will become more appealing over the next two years because the asset class's defensive characteristics contribute to risk management in times of market distress. The majority (85%) of respondents expect the regulatory environment to continue to move favourably for private debt markets, with one-quarter expecting significant improvements while 60% expect slight progress.

Nearly all (93%) investors agree that the bespoke nature of fixed income/credit means it is easier for investors to make a positive social and environment impact. Evgeny van der Geest, Head of Capital Markets Strategies, Aeon Investments said: "The survey shows that investors are aware of the multiple benefits from investing in structured credit and private debt markets, particularly given the current challenging economic conditions. It is clear fixed income plays an important role in helping investors achieve attractive risk-adjusted returns while also meeting sustainable investment goals."

Aeon Investments is focused on delivering long-term superior risk-adjusted returns, through stand-alone investments that provide its investors' access to key economic sectors. This is achieved by minimising downside risks to ensure capital preservation, and by designing a structure which prioritises alignment of interests. It employs a research-driven investment approach and uses a combination of qualitative and quantitative techniques. Idea generation and its due diligence process are based on a top-down approach, considering economic, credit and industry cycles, to identify inefficient markets and pricing dislocations.

At the portfolio level, Aeon Investments utilises a bottom-up approach, employing a rigorous due diligence process to assess the intrinsic value of the underlying collateral or credit, manage risk, and maximise return potential for investors. This structural, statistical, and fundamental approach gives us a deep understanding of risk, which allows Aeon Investments to mitigate and structure for idiosyncratic and systemic risk during portfolio construction, and for the duration of the investment.