Insurance Execs Plan to Boost Private Assets — Evening Brief – 10.18.24
A vast majority of insurance executives intend to increase private asset investments, with core credit strategies at the forefront, according to BlackRock’s 2024 Global Insurance Survey.
A total of 91% of the 410 insurance investors from 32 markets representing over $27 trillion in assets polled said they intend to grow their investments in private assets during the next two years. Geographically, 96% in North America and 96% in Asia Pacific are considering similar moves, indicating strong development in private market manager coffers.
“We’ve seen rapidly accelerated demand for private markets among insurers in recent years, given these investments’ dual benefits of diversification and increased income generation,” said Mark Erickson, global head of BlackRock’s Financial Institutions Group.
The allocation of insurance assets to credit strategies is expected to increase, with respondents seeking to up their exposure to private debt across multiple categories, including opportunistic private debt (41%), private placements (40%), direct lending (39%), and infrastructure debt (34%).
Portfolio investment yields have improved as global interest rates have risen over the last three years. Insurers are also capitalizing on the current environment by allocating opportunities in both public and private sectors.
Approximately 44% of respondents want to reduce their holdings in residential mortgage-backed securities (RMBS), 38% in collateralized loan obligations (CLOs), 36% in commercial mortgage-backed securities (CMBS), and 31% in below-investment-grade/high-yield bonds.
Furthermore, over half of insurers (52%) indicated that they intend to increase their allocations to multi-alternative investments to enhance customization and flexibility. Additionally, 30% of insurers plan to increase their allocation to hedge funds, while only 29% expect to do the same for private equity.
Infrastructure is also a prominent sector, with 30% aiming to increase their investments in the asset class. The survey revealed that 60% of insurers are focusing on clean energy infrastructure investments to achieve low-carbon transition goals, with wind and solar, together with technologies such as batteries and energy storage, recognized as the primary thematic areas of interest.
As BlackRock is in the midst of acquiring data provider Preqin, it emphasizes the significance of technology for investors amid the unpredictable macroeconomic and regulatory landscape.
The report indicates that integrated asset allocation (63%) and asset liability management (61%) are identified as strategic priorities for technology platforms.
Additionally, regulatory capital integration (51%) was identified as an area where technology could contribute value. According to 53% of respondents, private asset modeling is an additional area that insurers can leverage technology as they continue to expand into private markets.