US Pension Funds to Increase Allocations to Private Credit in 2025

Several US pension funds are set to increase their allocation to private credit in the 2025 financial year, reflecting the rising interest in the sector among institutional investors.

At a 21 August board meeting, the Employees Retirement System of Texas decided to raise its allocation to asset-backed, direct lending and distressed strategies.

In particular, the $39.1 billion pension fund has decided to invest between $1 billion and $1.8 billion into private capital markets during the 2025 financial year.

The investments will be made in two private funds – one involves an additional commitment to a fund already in the portfolio, while the other is a new fund with an identical strategy to an existing fund in the private credit portfolio.

Meanwhile, the Teachers Retirement System of Louisiana approved an increase of up to $1.2 billion in its allocation to private credit funds for the 2025 financial year.

The $27 billion pension fund has approved investments of between $600 million to $800 million in distressed/subordinated debt, along with $200 million to $400 million in direct lending.

The fund’s private markets manager recommended investing $160 million in Intermediate Capital Group’s ICG Europe Fund IX, $100 million to the Summit Partners Growth Equity Fund and $100 million to the THL Equity Fund X, which is a large-cap buyout fund managed by Thomas H Lee Partners.

The move comes as the fund made two commitments to private credit totaling $225 million. In March, it allocated $100 million to Comvest Credit Partners VII and $125 million to Castlelake Asset-Based Private Credit.

The Fire and Police Pension Association of Colorado also revealed $30 million of private equity commitments, including a $25 million commitment to the Peak Rock Capital Fund IV and a $5 million commitment to Transom Mahogany Co-Invest.