Australian wealth manager AMP Ltd is pulling back from private credit investments, citing stretched valuations in the A$159 billion firm's diversified credit portfolio. General manager Stuart Eliot said yield spreads have narrowed too much to justify risk levels, prompting a shift toward infrastructure assets instead.

The private credit allocation fell from 2.5% to roughly 2% of total holdings, representing about A$185 million in reduced exposure. While the firm isn't exiting positions directly, it's retaining capital as underlying deals refinance, holding proceeds in cash for reinvestment. This modest reduction signals changing sentiment among major pension managers in Australia's A$4.5 trillion retirement system.

The move comes amid mounting concerns across the $1.8 trillion private credit industry, where redemption pressures have hit funds managed by Apollo, BlackRock and Ares. Australian regulators have intensified oversight, demanding weekly data from private credit funds as global scrutiny increases.

Other major Australian pension funds are taking different approaches. Aware Super maintains its A$8 billion private credit allocation, while Colonial First State focuses on higher-quality issuers. Investment chiefs argue redemption strains primarily affect retail-heavy vehicles rather than institutional allocations, though deal competition remains intense.