Key Takeaways
- • Border to Coast, managing assets for 11 partner funds, has deployed approximately £3.5bn of a total £12bn commitment across private markets as of March 2023, with significant exposure across private equity (£3bn), infrastructure (£4.4bn), private credit (£3.2bn), and climate opportunities (£1.4bn).
- • The balance of power in private credit is shifting decisively toward lenders, who are now able to negotiate materially better terms and enhanced covenant protections, signaling a fundamental structural change in deal dynamics.
- • Default rates in private credit are expected to rise, driven by deteriorating credit conditions and the maturing nature of vintages in the private markets cycle.
- • Border to Coast's private credit strategy is concentrated in senior direct lending with selective exposure to real assets and opportunistic debt positions, positioning the fund for improved risk-adjusted returns in a lender-favorable environment.
- • Infrastructure represents the largest single commitment (£4.4bn) with diversified exposure across core, core-plus, and value-add strategies, with particular focus on renewables and digital infrastructure including co-investment opportunities.
Summary
Border to Coast, the collaborative investment platform managing assets for 11 local government pension scheme partner funds, has substantially deployed its private markets commitments since inception in May 2019. As of March 31, 2023, the organization had received £12bn in total commitments from its constituent funds, with approximately £9bn committed to underlying investments and £3.5bn actually drawn down across the portfolio.
Mark Lyon, Deputy Chief Investment Officer at Border to Coast, outlined a diversified private markets allocation strategy with meaningful exposure across multiple asset classes. The portfolio breakdown reflects the composite allocation decisions of partner funds rather than centralized mandates. Private equity commitments of £3bn are predominantly concentrated in buyout strategies with secondary exposure to growth, venture capital, and opportunistic funds, with notable sector tilts toward technology and healthcare. Infrastructure commitments totaling £4.4bn span core, core-plus, and value-add fund strategies, with substantial sector exposure in renewables and digital infrastructure alongside selective co-investment participation.
A critical market observation emerges from Lyon's assessment of private credit conditions. The balance of power in this segment is decisively shifting in favor of lenders, who are now positioned to negotiate materially improved terms and enhanced covenant protections. This structural realignment reflects tightening credit conditions and reduced competition among capital providers. Border to Coast's private credit allocation of £3.2bn is strategically concentrated in senior direct lending instruments, complemented by selective exposure to real asset financing and opportunistic debt positions—a positioning designed to capitalize on improving risk-adjusted return profiles. Additionally, the portfolio includes £1.4bn in climate opportunities funds spanning infrastructure, buyout, growth, and credit strategies with exposure to traditional renewables, hydrogen storage, grid infrastructure, energy efficiency, and decarbonization technologies.
Lyon noted that default rates in private credit are likely to rise as the sector navigates a regime change in market conditions. This assessment, combined with the improved lending terms now available, suggests investors with dry powder and flexible capital can access more attractive entry points. The typical private markets fund operates with a three-year investment period, requiring disciplined capital deployment strategies aligned with vintage diversification and portfolio construction principles.
Mark Lyon, Deputy Chief Investment Officer at Border to Coast, outlined a diversified private markets allocation strategy with meaningful exposure across multiple asset classes. The portfolio breakdown reflects the composite allocation decisions of partner funds rather than centralized mandates. Private equity commitments of £3bn are predominantly concentrated in buyout strategies with secondary exposure to growth, venture capital, and opportunistic funds, with notable sector tilts toward technology and healthcare. Infrastructure commitments totaling £4.4bn span core, core-plus, and value-add fund strategies, with substantial sector exposure in renewables and digital infrastructure alongside selective co-investment participation.
A critical market observation emerges from Lyon's assessment of private credit conditions. The balance of power in this segment is decisively shifting in favor of lenders, who are now positioned to negotiate materially improved terms and enhanced covenant protections. This structural realignment reflects tightening credit conditions and reduced competition among capital providers. Border to Coast's private credit allocation of £3.2bn is strategically concentrated in senior direct lending instruments, complemented by selective exposure to real asset financing and opportunistic debt positions—a positioning designed to capitalize on improving risk-adjusted return profiles. Additionally, the portfolio includes £1.4bn in climate opportunities funds spanning infrastructure, buyout, growth, and credit strategies with exposure to traditional renewables, hydrogen storage, grid infrastructure, energy efficiency, and decarbonization technologies.
Lyon noted that default rates in private credit are likely to rise as the sector navigates a regime change in market conditions. This assessment, combined with the improved lending terms now available, suggests investors with dry powder and flexible capital can access more attractive entry points. The typical private markets fund operates with a three-year investment period, requiring disciplined capital deployment strategies aligned with vintage diversification and portfolio construction principles.
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