‘Large institutional investors, like the Canadian Maple Eight pension funds, are not only continuing to invest in private credit, but are generally looking to increase their allocation,’ says Mathieu Desforges
Each month at BPM, we offer a slate of articles and content pieces that go deep on a particular topic. This month, we're exploring private markets and the utility in institutional portfolios.
Private credit's rapid march from niche allocation to portfolio centerpiece has forced a reckoning among institutional investors.
As assets under management swell and retail money floods into US business development companies, the question plan sponsors are asking has shifted as it’s no longer whether private credit belongs in a portfolio, but whether there’s an allocation limit and what happens when too much capital chases too few quality deals.
Mathieu Desforges, partner and head of private credit at Fiera Comox, sees the long-term case for private markets as firmly intact, driven by a once-in-a-generation investment cycle. Private equity, private credit, and infrastructure all offer institutional investors a way into those trends. But he’s also careful not to gloss over the headwinds as trade policy volatility, geopolitical conflict, and AI-related disruption have created a period of elevated uncertainty.
“Private credit entered 2026 facing a challenging environment, given the concern in the retail BDC market," he says. “But portfolio fundamentals remain strong, and challenges also creates opportunities for disciplined investors that can be selective. We believe the prospects for private credit remain as strong as ever. Bank retrenchment, higher interest rates and stronger lender protections have created durable tailwinds for private lenders.”
The numbers tell a compelling story about scale. Desforges pointed to findings from Moody’s that expect private credit assets under management to exceed $2 trillion in 2026, approaching $4 trillion by 2030. As a result, that growth has reshaped how pension fund allocators think about their portfolios.
"Large institutional investors… like the Canadian Maple Eight pension funds, are not only continuing to invest in private credit, but are generally looking to increase their allocation to the asset class," he said, pointing to structural forces – post-financial crisis bank retrenchment, tighter regulation, a permanent financing gap – as the foundation beneath that expansion.
The insurance market has also undergone its own shift. Insurers facing intensifying competition need higher returns but can now access private credit through capital-efficient vehicles such as structured notes, rather than reaching further up the public credit risk curve into high-yield bonds.
Plan sponsors, meanwhile, have moved past the threshold question of whether private markets belong in a portfolio. Liquidity dynamics, regulatory openness, and new product structures are pushing them to treat private markets as a strategic, long-term component rather than a tactical bet.
"The conversation is moving from whether to include private markets to how to integrate them responsibly and at scale," Desforges said. “Over the last few years, private markets, including private credit, have been representing a growing portion of plan sponsors’ portfolio. Private markets have become a core income engine for plan sponsors globally.”
He added defined benefit plans are well positioned to act on that shift, particularly as strong funded ratios give them the flexibility to accept illiquidity, and most mature plans are cash flow negative, creating a natural need for current income to meet retirement payments.
In his view, the loss of liquidity is a reasonable trade-off for plan sponsors with long-dated liabilities. He sees private credit as a core income-generating allocation that can also provide some inflation protection through floating rates, something investment-grade bonds are less well positioned to deliver in the current rate environment.
Rather than replacing traditional fixed income, private credit should sit alongside it, with each serving a different function in the portfolio, he said.
According to Desforges, demand for private capital is expected to continue to accelerate, in particular due to artificial intelligence, energy transition, manufacturing reshoring, and grid modernization. He suggests private markets across credit, equity, and infrastructure are set to play a central financing role in that buildout, creating a long-duration tailwind for the asset class.
"Private credit has earned its place as a foundational allocation in private markets, a durable source of yield and resilience that warrants thoughtful long-term integration, rather than a tactical allocation," he said. “We believe it's a multi-decade, secular tailwind trend for the private credit asset class.”
But he also warns that the opportunity set comes with real risks. As more capital pours into private credit, managers may face pressure to deploy capital, which can lead to spread compression and weaker underwriting standards. He also flags geopolitical instability, macroeconomic uncertainty, and the risk that AI could disrupt existing business models, especially in software and legacy technology.
While private credit deserves to be treated as a foundational part of a private markets allocation rather than a short-term trade, Desforges emphasized how “the next chapter” will reward discipline, “while offering growth opportunities.”
Success, in his view, “will separate the disciplined from undisciplined investors as we navigate the next credit cycle," he said, adding manager selection will determine outcomes.
"Dynamic strategies across geographies and capital structure, while maintaining investment discipline, will be key to mitigating these risks while continuing to deliver attractive risk-adjusted returns," said Desforges.
