LONDON - Allianz Global Investors, the insurance company's money management division, is pushing ahead with plans to raise at least 1.5 billion euros ($1.63 billion) for a new global private credit fund, a spokesperson said, as investors boost exposure to the asset class.

The company established the Allianz Global Diversified Private Debt Fund (AGDPDF) II in Luxembourg in mid-June, company filings show.

The fund plans to hold its first close before the end of the year, the spokesperson said, meaning it will have secured enough capital to start making investments.

Allianz raised 3.3 billion euros for an earlier fund in April, far exceeding its original 1.5-billion-euro target.

Money managers are vying for a slice of the growing private credit market, which emerged in the aftermath of the 2008 financial crisis and is currently estimated to have assets of $1.5 trillion. Private credit funds are increasingly competing with banks, including for financing large company buyouts.

Economic uncertainty caused by soaring interest rates has slowed down fundraising, but private credit funds have continued to attract investors, with more than $130 billion raised in 2023 so far, according to data from Preqin.

The fastest escalation in borrowing costs in decades has posed a test for private credit but so far defaults by borrowers have been limited.

A private debt index by law firm Proskauer showed default rates dropping to 1.64% in the second quarter of 2023, after two consecutive quarters of increases.

Rather than lending directly, the Allianz Global Diversified Private Debt Fund invests in other credit funds and also makes co-investments.

After rapidly increasing its allocation to alternative investments like private equity and infrastructure, Allianz's insurance business is now turning its attention back to vanilla bonds on the back of rising rates, Reuters reported earlier this year.

The group's alternatives portfolio stood at 231 billion euros at the end of June, a slight decrease from December, according to its mid-year results. ($1 = 0.9199 euros)

(Reporting by Pablo Mayo Cerqueiro in London; Editing by Elisa Martinuzzi and Jane Merriman)