Canadian pensions and insurers have amassed about $360 billion (C$500 billion) in private-credit exposure, most of it invested outside the country.

The findings highlight the growing role of Canadian institutional investors in global private lending while raising questions about how stress in the sector could affect Canada’s financial system, new research from the Bank of Canada stated.

Large Canadian pension funds held about $155 billion (C$215 billion) in private credit at the end of 2025, equal to roughly 9% of their invested assets. The country’s three largest life insurers held more than $144 billion (C$200 billion) in the first quarter of 2026, or about 22% of their invested assets.

Much of the exposure is tied to the U.S., where private-credit firms have increasingly competed with banks and syndicated loan markets to finance leveraged buyouts and other corporate transactions. In Canada, traditional lenders remain dominant, with banks and debt markets providing more than three-quarters of financing for private non-financial companies.

Canadian investment funds held about $39 billion (C$54 billion) in private credit in 2025, up more than 60% from 2020. The central bank said that estimate is likely too low, while more than two-fifths of those holdings were linked to real estate.

The growth comes as regulators scrutinize vulnerabilities in the rapidly expanding private-credit market. The Bank of Canada has warned that complex structures, limited transparency and the sector’s relatively short history through severe economic downturns make it difficult to determine where weaknesses could emerge.

Stress in overseas private lending markets could reach Canada through loan losses at pension funds and insurers, as well as tighter financial conditions more broadly.

Still, the central bank said the direct risks to Canada appear manageable. Pension funds and insurers generally have long investment horizons and rely less on short-term financing, reducing the likelihood that they would be forced to sell assets during periods of market stress.

Their direct lending activities can also give them greater access to borrower information and more control over investments than investors in private-credit funds.

For life insurers, the 22% figure may also overstate their exposure to the riskiest parts of private credit. Insurers have invested in privately placed corporate debt for decades because long-term loans can help match assets with insurance liabilities while offering higher yields and stronger covenants than comparable public bonds.

Canadian banks provide another link to the global private-credit market. They had at least $29 billion (C$40 billion) in loans outstanding to asset managers operating private-credit funds in the first quarter, with most of that lending going to U.S.-based funds.

The Bank of Canada said those exposures are generally well protected because banks often provide subscription facilities secured by investors’ commitments to private-credit funds, allowing fund investors to absorb losses before the banks do.

The data also shows that private credit plays a very different role in Canada than in the U.S. While Canadian institutions have become major investors in the asset class abroad, domestic companies still rely heavily on banks and traditional debt markets for financing, limiting private credit’s footprint within Canada itself.

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