- Over 90% of LPs will either maintain or boost alternative credit allocations this year
- LPs seek broader exposure across credit sub-strategies with infrastructure debt popular
- Regional rebalancing underway as European and APAC investors reveal ‘home bias’
- Fund structuring is changing fast as LPs favor flexible solutions like Evergreen vehicles
New York, 11 February 2026: The vast majority (92%) of global institutional investors (LPs) intend to either increase (51%) or maintain (41%) their alternative credit allocations in 2026, with widespread appetite for broader exposure across geographies and sub-asset classes, according to new research from Benefit Street Partners (BSP) – a Franklin Templeton company.
BSP’s research, which surveyed 135 investment professionals at asset owners across North America, EMEA and APAC with a combined AUM of $8 trillion, reveals rising sophistication among LPs as alternative credit has become a mainstay of institutional portfolios1.
Diversification and returns drive continued demand for alternative credit
Portfolio diversification (85%) and the potential for higher total returns compared with traditional fixed income (81%) were the main motivations for increasing allocations to alternative credit – with larger existing allocators most likely to add more.
Among those boosting investment into the asset class, 47% plan to increase their exposure to infrastructure debt, followed by direct lending (39%), asset-based lending (35%), special situations debt (30%), and commercial real estate debt (28%). This mix reflected expectations for the best risk-adjusted returns over the next three years, with infrastructure debt (53%) again the leading response.
Investors cautiously upbeat on the macro-outlook, despite the noise
LPs expressed optimism about the potential impact of macroeconomic forces on alternative credit portfolios. Almost half (47%) see the current interest rate outlook as an opportunity for positive performance, rather than problematic (23%), with similar figures for market volatility (44% vs 20%). Meanwhile, an increasingly active M&A and LBO environment is widely considered to be more promising (45%) than challenging (5%) from a performance perspective.
Alternative credit goes global
The US is the largest market for alternative credit, accounting for 65% of global assets, and it remained the leading target for new allocations over the past 12 months. Over a third (34%) of global investors increased their alternative credit allocations to the US in 2025, followed by Europe (27%), APAC (26%) and Emerging Markets (22%).
However, a geographical rebalancing is underway, with European and APAC investors exhibiting an increased ‘home bias’. In Europe, 51% of investors increased their European allocation in 2025 (versus just 21% increasing their US allocation) and, in APAC, 34% of investors increased their APAC allocation. While this narrowly lags the US (37%), it is significant in the context of the small size of domestic APAC alternative credit markets.
Rise of the Evergreen fund and convergence of public and private credit
BSP’s survey points to growing interest in different and newer fund structures. Today, 71% of investors are using traditional, closed-end funds, but just 59% expect to use them over the next 12 months. By contrast, use of Evergreen funds is expected to surge from 33% to 42%, and Separately Managed Accounts (SMAs) or ‘fund-of-fund’ structures rise from 34% to 40%.
Among the most profound structural trends is the growing integration of public and private credit. Currently, 64% of LPs treat the two as distinct asset classes. But, when asked for their expectation in five years’ time, the number drops to 41%. Similarly, 30% say they are now beginning to take a more integrated approach, but 40% expect that to be the case in five years.
However, just 19% expect full integration by five years’ time, up from 5% today. The perceived liquidity mismatch between public and private credit is considered the main barrier to full convergence, cited by 65% of LPs.
The credit manager sweet spot
Commenting on the survey and market in general terms, Allison Davi, co-Chief Operating Officer at BSP, said: “While most global investors look set to increase allocations to alternative credit, they are getting more sophisticated in how they curate their portfolios. They want greater diversification in terms of product set, geographic exposure and fund structuring – and they want fewer, deeper relationships with managers to deliver this.
“Not all managers are in the sweet spot. Those firms who have the appropriate scale, a quality track record as a credit specialist, and a broad range of asset class sub-categories, as well as a flexible, innovative and service-led approach, will be well-placed to succeed. We believe this combination creates the best alpha engine for investors – especially as public and private markets converge – and it’s what BSP is focused on in partnership with Franklin Templeton.”
ENDS
1 Results reflect respondent views and may not be representative of the broader institutional LP base.
Media contacts
Sam Turvey
Head of Communications
Benefit Street Partners (BSP)
[email protected]
+44 (0) 782 783 6246
Tom Straker
Lansons
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+44 (0) 7505 425 961
About Benefit Street Partners
Benefit Street Partners (BSP) is an alternative credit pioneer with $92 billion1 in assets under management (including Apera). It seeks to deliver attractive, risk-adjusted returns through its deep specialism, long-term relationships and global reach. A wholly owned subsidiary of Franklin Templeton, BSP is focused exclusively on credit. Through its disciplined, solutions-oriented approach, BSP unlocks opportunities across market cycles and geographies. The firm manages strategies spanning private debt, real estate debt, structured credit, and liquid loans. For more information, visit bspcredit.com.
1 Estimate as of 12/31/25.
About Franklin Templeton
Franklin Templeton is a trusted investment partner, delivering tailored solutions that align with clients’ strategic goals. With deep portfolio management expertise across public and private markets, we combine investment excellence with cutting-edge technology. Since our founding in 1947, we have empowered clients through strategic partnership, forward-looking insights, and continuous innovation – providing the tools and resources to navigate change and capture opportunity. To learn more, visit franklintempleton.com and follow us on LinkedIn.
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