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Institutional investors step up bets on private credit as insurers, pension funds and DFIs back new funds

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In short

Asset allocators are increasingly differentiating private credit based on manager track records, collateral structures, and targeted risk profiles. Neo Alternative Asset Managers witnessed this momentum firsthand, with institutional commitments surging to nearly a quarter of its second special credit fund's corpus. The overall market opportunity has now scaled to roughly ₹1 lakh crore annually, supporting funds like Neo as they target collateral-backed operating business investments yielding gross returns above 20%.

Key points

  • Institutional capital is increasingly separating private credit from venture capital to t…: Institutional capital is increasingly separating private credit from venture capital to treat it as an independent asset class.
  • Reported private credit market transactions reached nearly $7 billion during the first ni…: Reported private credit market transactions reached nearly $7 billion during the first nine months of the year.
  • Fund managers are deploying capital into collateral-backed operating businesses to achiev…: Fund managers are deploying capital into collateral-backed operating businesses to achieve targeted gross returns exceeding 20%.

Sources checked by our analysis pipeline: 1

Institutional investors accounted for 22-25% of the ₹6,200 crore corpus of Neo Alternative Asset Managers' second special credit opportunities fund, compared with 1-2% in its first fund, the firm said. Ascertis Credit's fourth fund, which crossed $700 million in commitments in October, attracted both existing and new institutional investors At Neo, domestic insurance companies form a large part of the institutional pool, said chief executive Hemant Daga. It also received commitments from overseas pension funds.

Ascertis Credit, whose fourth fund crossed $700 million (around ₹6,500 crore) in commitments in October, saw investments from existing and new institutional investors, including insurance companies and development finance institutions.

"The strong reception comes amid increasing institutional interest in performing private credit strategies as investors seek resilient income-generating investments away from market volatility with attractive risk-adjusted returns," Ascertis said in a statement.

Institutional investors are increasingly evaluating private credit separately from private equity and venture capital, with greater focus on the risk, returns and track record of individual credit funds.

Neo is targeting 35-40 investments, with an average size of ₹250-300 crore, and expects gross…

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