Key Takeaways
- • Dutch insurers' private credit exposure rose from €12.8 billion to €17.5 billion between 2021 and 2025, now about 8.3% of their assets under management, according to De Nederlandsche Bank (DNB).
- • Dutch pension funds' private credit exposure was virtually unchanged over the same period at €13.1 billion, equal to roughly 1.3% of their assets under management.
- • DNB judges current systemic risks from private asset investments by Dutch institutional investors to be limited, but warns that rapid growth requires close monitoring.
- • Key risks flagged by DNB include limited tradability, valuations that may lag or understate market stress, and lower transparency that obscures interconnections and concentrated exposures.
- • DNB is working internationally on better private-market data and exploring scenario analyses and stress tests, as private asset resilience has not been tested in a downturn at current scale.
Summary
De Nederlandsche Bank reports that Dutch insurers and pension funds are steadily increasing their allocations to private assets, with private credit the most notable area of growth. According to DNB, insurers' total private credit exposure rose from €12.8 billion in 2021 to €17.5 billion in 2025, accounting for approximately 8.3% of their assets under management. Pension funds, by contrast, held €13.1 billion in private credit over the same period, a share of about 1.3% of assets under management, with exposure essentially flat. Direct lending to businesses and structured finance are the most common forms of private credit held, and DNB notes significant differences in exposure across individual institutions.
DNB frames private markets as offering macroeconomic benefits, including reducing the economy's dependence on bank finance and supplying long-term capital for innovation, growth sectors and capital-intensive investment. Those benefits, the central bank cautions, are only realized over the long term if the associated risks are properly identified and managed. It highlights three: limited tradability, since investors generally cannot sell holdings easily; valuation risk, as the absence of market prices means deteriorating conditions may be reflected inadequately or with a delay, or abruptly, given that valuations rely on periodic estimates and models; and reduced transparency, which makes it harder to map interconnections between financial institutions and concentrated exposures.
DNB's assessment is that systemic risks from Dutch institutional investors' private asset holdings are currently limited, and that the present scale of exposures does not raise concern about immediate systemic risk. It considers forced asset sales by insurers or pension funds under stressed conditions unlikely. Nonetheless, the central bank stresses the need for close monitoring given rapid growth, noting that problems at individual institutions with high private asset allocations could create systemic risk through a loss of confidence. DNB is working internationally to improve data availability and quality, given the cross-border nature of these markets, and is exploring scenario analyses and stress tests for private markets. It notes that the resilience of many private assets at their current scale has not yet been tested in a market downturn or recession. DNB also argues that institutions' risk management should be tailored to the nature and complexity of private investments to prevent private markets from amplifying shocks in the financial system.
DNB frames private markets as offering macroeconomic benefits, including reducing the economy's dependence on bank finance and supplying long-term capital for innovation, growth sectors and capital-intensive investment. Those benefits, the central bank cautions, are only realized over the long term if the associated risks are properly identified and managed. It highlights three: limited tradability, since investors generally cannot sell holdings easily; valuation risk, as the absence of market prices means deteriorating conditions may be reflected inadequately or with a delay, or abruptly, given that valuations rely on periodic estimates and models; and reduced transparency, which makes it harder to map interconnections between financial institutions and concentrated exposures.
DNB's assessment is that systemic risks from Dutch institutional investors' private asset holdings are currently limited, and that the present scale of exposures does not raise concern about immediate systemic risk. It considers forced asset sales by insurers or pension funds under stressed conditions unlikely. Nonetheless, the central bank stresses the need for close monitoring given rapid growth, noting that problems at individual institutions with high private asset allocations could create systemic risk through a loss of confidence. DNB is working internationally to improve data availability and quality, given the cross-border nature of these markets, and is exploring scenario analyses and stress tests for private markets. It notes that the resilience of many private assets at their current scale has not yet been tested in a market downturn or recession. DNB also argues that institutions' risk management should be tailored to the nature and complexity of private investments to prevent private markets from amplifying shocks in the financial system.
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