(Bloomberg) -- Australian investment firm QIC Ltd. is eyeing a greater allocation to private credit due to its ability to balance portfolios against higher market volatility, just as the $1.6 trillion asset class came in for renewed criticism this week for its potential risks.
“We’re probably looking to build out more of that mid-risk part of our portfolio” in assets such as private debt, real estate and infrastructure, the firm’s state chief investment officer, Allison Hill, said at a conference in Adelaide Wednesday. QIC manages more than A$102 billion ($68 billion).
The global private credit market has more than tripled in size since 2015 as money flows in from pension funds, sovereign wealth groups and banks. At the same time as the huge growth, many are questioning how this opaque corner of finance will cope when a recession hits and UBS Chairman Colm Kelleher warned on Tuesday that it’s an “asset bubble.”
Still, for many, like Hill, its risk-return characteristics mean it can provide a ballast within broader portfolios that’s particularly useful, as she expects rocky markets heading into next year. Elsewhere in Australia, it’s an asset class increasingly popular with pension funds, which are also attracted by its ability to provide a hedge.
“So we are sort of making sure we try and have as much diversification, you know, to try and build that resiliency into the portfolio,” she said. “There could be more volatility in markets,” she said, adding that real assets such as property and infrastructure were also appealing.
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