Beware rushing into private credit deals, warns Canadian pension giant

Graham said despite low distributions from private equity funds back to investors in recent years, CPPIB had been investing in the asset class for 20 years. Photo by Gavin Young/Postmedia/Postmedia filesArticle contentPrivate credit “is a buyer beware” market, the head of Canada’s largest pension fund said, warning institutional investors against rushing into deals.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentJohn Graham, chief executive of Canada Pension Plan Investment Board, told the Financial Times that the $778 billion fund mainly invested directly in private credit rather than funds.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.We apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Play VideoArticle contentHe said to non-investment grade private credit investors: “It’s a ‘buyer beware’ market. You should be sophisticated and you should know what you’re buying.”Article contentArticle contentWhile Graham thought private credit served a useful role in the system, distributing risk broadly, he had concerns over the “speed at which deals are getting done”.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article content“We have to make sure that we aren’t compromising on due diligence,” he said, adding that he sometimes had to remind his teams that “it’s OK to miss something”.Article contentGraham ran credit strategies at CPPIB before taking the top job in 2021. His comments come as money continued to pour into private credit this year, which he said had contributed to rushed deals.Article contentPrivate debt funds raised US$154 billion in the first nine months of this year, according to PitchBook. That puts managers on track to raise less than the US$230 billion for 2024, but annual fundraising is still far above levels seen a decade ago.Article contentIndividual investors have also been buying more.

Consultancy Oliver Wyman said that private credit holdings by the wealthy have grown 2.5 fold in the past three years — four times faster than the traditional institutional business.Article contentHowever, the sector has faced a series of setbacks this year. Blackstone president Jon Gray said in October that the era of excess returns had ended as central banks had cut interest rates, with mid-teens returns in private lending giving way to more muted results.Article contentArticle contentThe implosions of auto parts maker First Brands and subprime auto lender Tricolor, which had both amassed debt from non-bank lenders, also reverberated across credit markets and prompted further warnings on wider risks from private credit blow-ups.Article contentRead More The secretive First Brands founder and the future of private credit Private credit could 'amplify' next financial crisis, study finds Article contentCPPIB has a large allocation to private markets compared with some other large pension funds globally, with 11 per cent in public and private credit and 29 per cent invested in private equities.Article contentGraham said despite low distributions from private equity funds back to investors in recent years, CPPIB had been investing in the asset class for 20 years. “We continue to be believers in the governance model around private equity and private ownership,” he added.Article contentGraham also said that the partnership between institutional investors such as CPPIB and private equity funds, known as general partners, had been “a very profitable model for everybody”.Article contentIf the rush of retail funds into private equity changed norms, such as buyout fund managers offering their large fund backers the chance to invest directly into companies to lower their fees, he said it would “impact, undoubtedly, our appetite for the asset class”.Article contentLast month, the Institutional Limited Partners Association trade group warned that the number of deals needed to deploy wealthy individuals’ cash could pull managers’ attention away from investing the capital of pension plans and endowments.Article content© 2025 The Financial Times LtdArticle contentTrending This generation of Canadians is rapidly increasing its wealth and may soon unseat the boomers Wealth This Canadian mine is as big as a city. It has a basketball court and its chefs serve 4,000 meals daily Commodities 'Wild West out there': Cargo theft reports soar in Canada, but that's just the tip of the iceberg News David Rosenberg: 10 reasons why we're now bullish on the Canadian dollar for the first time in many years News Economy has Canadians exploring cheaper cars as stock leans to luxury Autos Share this article in your social networkComments Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. This generation of Canadians is rapidly increasing its wealth and may soon unseat the boomers Wealth This Canadian mine is as big as a city. It has a basketball court and its chefs serve 4,000 meals daily Commodities 'Wild West out there': Cargo theft reports soar in Canada, but that's just the tip of the iceberg News David Rosenberg: 10 reasons why we're now bullish on the Canadian dollar for the first time in many years News Economy has Canadians exploring cheaper cars as stock leans to luxury Autos