Phoenix Group private credit allocation exceeds £8bn

Phoenix Group’s private credit and broader illiquid allocation has moved past the £8bn mark as the UK consolidator accelerates its push toward a 40% illiquids target across its balance sheet. The strategy is anchored in ramped-up origination, growing annuity flows and a willingness to finance diversified private credit pools as the group increases its focus on spread and matching-adjustment income.

Phoenix set out its illiquid ambition for 2021, stating that it intends to originate around £3bn of illiquid assets in the year. The group said it is investing in its origination capabilities, signalling a shift from opportunistic allocations to a more programmatic sourcing model across direct lending, private placements and infrastructure. Illiquids also include smaller holdings of commercial real estate and local authority loans, giving the portfolio a multi-sector profile rather than a single-asset-class bet. Phoenix stated that it is happy to finance diversified pools of private credit, underlining a preference for scaled, multi-borrower structures that can be slotted efficiently into annuity-backed portfolios. This sits alongside the group’s regular annuity activity, with Phoenix transacting approximately £6–8bn of annuities each year, providing a recurring liability pipeline for illiquid deployment.

Phoenix has tied its investment strategy directly to cash generation, setting a new one-year cash generation target range of £1.5bn to £1.6bn for 2021. The group also reported that it remains on track to deliver its upgraded five-year cash generation target of £6.8bn for 2019–2023, with illiquids a key contributor to that profile.

On the liability side, Phoenix reached an agreement with the trustees of the Pearl Pension Scheme for a buy-in of the full £3bn of scheme liabilities, of which Phoenix is the parent sponsor. The group said the buy-in will be delivered through a series of tranches over the next two to three years, creating another structured channel for deploying illiquid and private credit assets against predictable cash flows.

With the 2019–2023 cash generation horizon already framed and the Pearl tranches scheduled over the next few years, the next decision points will centre on how quickly Phoenix can scale origination to support a 40% illiquids allocation without diluting credit quality.

--- Sources: https://www.thephoenixgroup.com/investors https://www.thephoenixgroup.com/media/zekjvp5w/fy20-results-presentation-scripted.pdf https://privatemarketsprofile.com/inside-phoenix-groups-push-to-scale-private-markets-across-annuities-and-dc/