Canadian allocators may still be committed to private credit, but their appetite may have plateaued.

A live poll conducted at Institutional Investor’s private credit forum in Toronto this month revealed that most Canadian allocators (57 percent) plan to keep their allocations to private credit the same over the next 12 months. Though private credit currently makes up 44 percent of allocators’ portfolios, none are planning any significant increases — only 38 percent expect to “increase modestly.” (Half the respondents self-identified as large Canadian public pension managers with over C$150 billion in assets, by far the largest cohort.)

While 24 percent of allocators attending II’s private event describe the Canadian domestic private credit opportunity set as attractive but capacity-constrained, 43 percent think it’s too small or bank-dominated to deploy meaningful capital. Twenty-nine percent won’t even consider domestic private credit.  for their program. Only five percent are looking to increase their Canadian allocations. 

Canadian allocators are also showing no home bias when it comes to the asset class: Only 8 percent of responding allocators found Canada the most attractive region for their next private credit commitment, while 63 percent say it’s the U.S. 

“There are transparency and liquidity issues with private credit,” said Keith Ambachtsheer, founder of KPA Advisory and director emeritus of the Toronto-based International Centre for Pension Management. “This translates into logical demand limitations.” (Ambachtsheer qualified that the issues in private credit are unique to the asset class but not necessarily to the region.)

When asked where they’re most likely to add in the next 12 months, 31 percent said infrastructure debt (meanwhile on the equity side, value-add infrastructure can potentially generate private equity returns), followed by private investment-grade credit (25 percent), and asset-based finance (19 percent).

But if enthusiasm for private credit is waning among Canadian allocators, it isn’t due to economic policy uncertainty: 70 percent said the past year of headlines have not affected their pace of commitments (the rest said it’s slowed their pace, but they’re still committing). 

In fact, the top concern among Canadian allocators is not headline risk or retail redemption pressure or regulatory scrutiny but spread compression: 30 percent of respondents say there’s too much capital chasing deals. Tied for second place — both at 17 percent — were “software and tech borrowers exposed to AI disruptions” and “valuation lag and marketing practices.” 

This aligns with recent findings from II’s latest global private credit survey — particularly that most LPs are looking to maintain their current PC allocations with fewer managers. However, it goes against the current more bullish narrative of some GPs — and the results of some recent polls revealing that most allocators plan to increase their private credit allocations over the next year. 

Though most Canadian allocators appear content with their domestic private credit allocations, appetite for the asset class is growing among investors globally. Among its members of global alternatives managers, the Alternative Investment Management Association is seeing double-digit growth in private credit assets under management. Jiri Krol, AIMA’s deputy CEO and global head of government affairs, said this “growth reflects the expanding role private credit plays in… providing capital for real estate, infrastructure, and asset-based lending.” (AIMA plans to issue its own report in October.)

These polling results come as Canada’s government is making a concerted push to channel more institutional capital into domestic infrastructure. Prime Minister Mark Carney recently announced nearly C$100 billion in new Canadian investment from institutional investors, including a C$50 billion domestic infrastructure fund from CPP Investments and Brookfield Asset Management targeting large-scale projects across the country. PSP Investments is also increasing its Canadian investments by an additional C$25 billion, and the Ontario Teachers’ Pension Plan investing an additional $10 billion in public and private market opportunities.