Peer Intelligence | Winter 2025

Race against metrics: Private Credit Adoption Accelerates, but Benchmarking Lags 

Private Credit is becoming a key part of pension fund strategies, but uneven benchmarking creates challenges. Discover the latest trends and insights from CEM's 2025 Global Leaders study. 

By Chris Flynn, Farah Vallimamode, Andrew Kaufman & Quentin Spehner

Private Credit stands out as the fastest-growing segment of private markets, transforming how pension funds deploy capital over the past decade. The asset class’s evolution has positioned it as the focus of CEM’s 2025 Global Leaders study. Initial findings reveal distinctive patterns in Private Credit’s institutional adoption and benchmarking. 

Growing Institutional Adoption 

Private Credit’s transition from a marginal to an established asset class is reflected in allocation patterns. The number of funds in the CEM database reporting a dedicated Private Credit portfolio has grown consistently by 5% per year since 2010, reaching 61% in 2023. Historically, many funds included Private Credit within broader asset class categories such as fixed income, real estate, and infrastructure. Combined Private Credit and Private Mortgage holdings now account for 2.8% of assets under management, matching the scale of typical hedge fund or infrastructure allocations. The shift to dedicated programs and teams reflects a growing recognition of Private Credit’s distinct characteristics.  

Despite this rapid adoption, Private Credit still lags behind its more established cousin. Three in five funds now maintain dedicated Private Credit allocations, compared with four in five for Private Equity portfolios—a gap that hints at further room for expansion in the sector. 

Challenges in Benchmarking 

The rapid growth of Private Credit has brought fresh challenges in performance measurement. Chief among these is the question of appropriate benchmarking, where no clear consensus has emerged. 

The benchmarking landscape for Private Credit remains notably fragmented. Some 60% of funds rely on public market indices—either single measures or blended indices—to gauge performance. The remainder employs a diverse mix of benchmarks: custom benchmarks rank as the most popular alternative, followed by absolute return targets, while peer-based and inflation-linked measures see more limited adoption.

The appeal of public market benchmarks lies in their investability. Among funds using public market benchmarks, short-duration high yield and treasury indices dominate—though with notable differences in how they approach premiums. Those employing treasury benchmarks almost universally add a premium, averaging 4.2%. High-yield users less systematically add premiums given these indices’ higher returns, and premiums average 1.6% when applied.

Building Better Benchmarks 

CEM’s findings suggest Private Credit is poised to join the ranks of mainstream private market strategies, with adoption trends pointing to further expansion. Yet the sector’s rapid growth has outpaced the development of robust performance measures. While public market indices remain the preferred benchmark, their relatively weak correlations with actual returns highlight the limitations of current approaches. 

To address this gap, CEM's Global Leaders project is exploring advanced statistical methods to assess risk-adjusted performance in the Private Credit space. The 2025 initiative, which brings together pension giants with sophisticated investment programs, continues to welcome new participants in this year’s research.  

Funds with complex private markets portfolios interested in contributing are encouraged to join the project by contacting research@cembenchmarking.com