The majority of independent financial advisers (IFAs) are planning to reallocate from public fixed income to private credit, new research has suggested.

A survey of more than 50 IFAs by turn-key alternative investment platform Crystal Capital Partners found that over 60 per cent are looking to increase their exposure to private credit this year.

Of those who said they were looking to increase their exposure, over 35 per cent said they are allocating with new money, while over five per cent said they are reallocating from other alternative asset classes such as private equity or hedge funds.

Read more: Private markets become ‘a mainstay’ of insurance portfolios

Meanwhile, 35 per cent of respondents said they are planning to reallocate up to 10 per cent of their clients’ portfolios from public fixed income to private credit; over 15 per cent of respondents said they were looking to reallocate up to 25 per cent from public fixed income; and under five per cent of IFAs said they were looking to reallocate 50 per cent or more from public fixed income.

When asked why they want to include private credit strategies in their investment allocations, the three most common answers were high yield potential (80 per cent), better risk-adjusted returns (80 per cent), and diversification benefits (over 70 per cent).

The most popular segment of the private credit market cited by IFAs was direct lending (50 per cent) followed by real estate debt (over 25 per cent), and mezzanine debt and special situations (both over 20 per cent).

Read more: Goldman Sachs: Pension funds eye private credit in 2024

“Private credit has been the most popular private markets strategy on our platform by far over the past year, and we saw a 30.52 per cent year-on-year growth to December 2023 in allocations,” said Steven Brod, senior partner, chief executive and chief investment officer of Crystal Capital Partners.

“The strategy has exploded in popularity as a traditional fixed-income replacement and alternative source of funding. We anticipate continued high demand as financial advisors benefit from variable rate term sheets and address interest rate risk in their portfolios.”

Read more: JPMorgan bullish on direct lending, puts $3tn value on private credit market