By NordicInvestor editorial team

We are proud to present the NordicInvestor Alternative Credit Report, which compiles answers from investors across the Nordics. The responses we have received provide valuable insight into the questions that allocators are facing in a new economic climate.

We would like to thank all the investors that have participated and we would also like to thank the team at Aegon Asset Management who have provided us with support for this project.

Over the past year we have interviewed allocators who specialize in alternative and private credit in Sweden, Denmark, Norway, Finland and Iceland. They work for pension funds, insurance companies, banks, family offices and consultants. Many of the firms have been allocating to alternative credit for at least 10 or 15 years and together they manage over EUR 20 billion in the asset class.

Key highlights include:

  • Alternative Credit, including liquid and illiquid strategies, is now a core strategic allocation commonly set at between 9% and 30% of assets
  • Private credit strategies, including direct lending, on average now make up around half of allocations to alternative credit
  • Yield pickup, diversification, and floating rate exposure tracking higher interest rates, are the top three lures
  • Collateral, structuring and covenants are also seen as important risk mitigants
  • Allocators fear recession, rate rises, refinancing failures and defaults
  • They seek managers with workout and restructuring expertise – and find private credit workouts can be swifter and simpler than in public credit
  • Some investors prioritise avoiding defaults through more senior, less leveraged structures and less cyclical industries
  • Other investors embrace defaults as an opportunity to capitalise on the next distressed debt cycle
  • ESG data reporting harmonisation remains a challenge, but both allocators and managers are striving for improvement