Private credit, just recently one of the hottest asset classes for institutional investors to park their money, is losing ground to other strategies, according to a new report from Canoe Intelligence.
Private credit accounted for 6.8% of institutional investors’ alternative-asset holdings in the fourth quarter of 2025, down from 9.7% December 2024. However, the asset class’s net asset value increased roughly 20% from June 2024, according to Canoe. The decline reflects a shift in portfolio composition as other assets grew faster, rather than a contraction in private credit assets.
The report, sourced from primary documents across 44,000 funds that provide visibility into $11 trillion in AUM, tracks institutions giving money to and receiving money back from all sorts of alternative investors, from venture capital to hedge funds.
Private credit’s share of institutional portfolios has shrunk in part because investors have been receiving repayments and distributions from loans, “the asset class doing exactly what it is supposed to do,” said Mike Muniz, chief strategy officer at Canoe Intelligence.
What happens next is “the more consequential question,” he said, as new checks to private credit are not keeping pace with distributions, a sign that “LPs are not in a rush to redeploy at the same rate.”
Business Insider recently found that some institutions are reducing or reassessing their investments in private credit retail funds, as those retail-focused funds face record redemptions amid concerns about private credit performance and the potential impact of AI. While retail investors are asking for their money back, institutional investors are choosing to put their gains elsewhere.
“That is not the same as abandoning the asset class, but it does suggest a degree of selectivity,” Muniz said about the firm’s report.
Future data on where investors are putting their money will help show whether this is a decision based on the spreads offered by private credit or “more attractive opportunities elsewhere,” he said.
“Right now, it points to patience rather than conviction,” he said.
The data shows an increasing preference for the industry’s largest players. The 50 biggest managers by AUM, who accounted for 51% of investors’ net value in the fourth quarter of last year, up 6% in one quarter after new capital commitments nearly doubled quarter-over-quarter for investors with more than $500 billion.
This dynamic appears to have continued going into the first quarter of this year, with large players like Blackstone reporting near-record private credit fundraising from institutions.
Asset classes that are winning investor cash
The only asset class in the dataset to record net inflows from investors was infrastructure, with $1.38 billion. The data is sourced from Canoe’s 500+ institutional clients and is not a census of the entire alternatives market, but provides directional trends about allocation.
Last quarter had the largest total infrastructure contributions, $5.68 billion, that Canoe has recorded since launching this report six quarters ago. The digital infrastructure bet is likely driving this, as shown by the popularity of the highly stable “core-plus” strategy, which combines relatively low-risk, income-generating bets with smaller allocations to riskier assets.
“Infrastructure Core Plus, the strategy that has driven net inflows for four straight quarters, is built around operational, contracted, long-duration assets,” Muniz said. “Data centers fit that profile precisely.”
While the data can’t be conclusively tied to individual assets, Muniz said, the pattern of steady capital flow that accelerated through 2025 leaves little doubt.
“I would be surprised if it were anything else,” Muniz said.
Other asset classes that have grown their share of investors’ portfolios are hedge funds, up from 15% of net value in mid-2024 to 22% last quarter, and venture capital, which has overtaken private credit in the size of institutional portfolios for the first time in Canoe’s dataset.
Institutional “allocators are leaning in, not pulling back” in venture capital, said Muniz. Yes, a boom in AI startups surely plays a part, but investors are making a “vintage-year decision,” betting that the current startup market will present some winning investment opportunities.
“The capital is moving,” Muniz said. “LPs are choosing to be in the room.”
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