AMSTERDAM — Some of Europe’s largest pension funds have begun quietly reducing their exposure to private credit, the fast-growing business of lending directly to companies outside the bond market, in what analysts say is the first sustained retreat from an asset class that absorbed hundreds of billions of euros of retirement savings over the past decade.
At least six Dutch, Danish and Swedish pension funds managing a combined 1.1 trillion euros, about $1.19 trillion, have cut target allocations to private credit this year or declined to recommit to new funds, according to disclosures reviewed by The Continental Times and interviews with investment officers. The Dutch health care workers’ fund PFZW, the country’s second largest, said in a September filing that it would reduce its private debt target to 3 percent of assets from 5 percent, citing “a less favorable balance of risk and return.”
“For ten years, private credit paid you 300 or 400 basis points over public bonds for the inconvenience of not being able to sell,” said Erik van der Berg, chief investment officer of a Dutch industry-wide fund who spoke on the condition that his fund not be named because its review was continuing. “Today that premium is closer to 150 points, defaults are rising, and we are being asked to lock up money for seven years to earn it. The math has changed.”
Private credit grew from a niche into a $1.9 trillion global industry after the 2008 financial crisis, as regulations pushed banks out of riskier corporate lending and institutional investors hunted for yield in an era of near-zero interest rates. European pension funds were among the most enthusiastic, with allocations rising from under 1 percent of assets in 2014 to an average of about 4.5 percent in 2025, according to the consultancy Mercer.
The reversal reflects several pressures. Public bond yields have remained above 3 percent for three years, narrowing private credit’s advantage. Default rates on private loans in Europe rose to 4.1 percent in the second quarter, the highest since the asset class began reporting comparable data, according to the ratings firm Fitch. And Dutch funds in particular face a 2027 deadline to transition to a new pension contract that rewards liquidity, making illiquid assets less attractive.
Fund managers in the industry say the pullback is modest and mostly about rebalancing. “Allocations grew faster than anyone planned because the asset class performed. Trimming from 5 to 3 percent is not an exit,” said Céline Dumont, head of European private credit at a large alternative asset manager in Paris. She noted that insurers and sovereign wealth funds continued to increase their commitments.
But the shift matters at the margin, particularly for mid-sized European companies that have come to rely on private lenders. “When the pension funds stop writing checks, the funds stop writing loans, and a company that refinanced at 9 percent in 2023 finds no one picks up the phone in 2027,” said Dr. Thomas Wieland, a finance professor at the University of Mannheim. “That is where this shows up: not in Amsterdam, but in a factory in Lombardy.”
PFZW said its reduced target would be reached by 2028.
A version of this article appears in print on Oct. 11, 2026, Section B, Page 13 of the European edition with the headline: European Pension Funds Begin Pulling Back From Private Credit After a Decade of Rushing In.
