More than half of global insurance companies plan to increase their allocation to private assets over the next 12 months, according to a recent report by Goldman Sachs Asset Management (GSAM). 

The survey, Balancing With Yield On The Inflationary Tightrope, was conducted in early February and administered to 343 CIOs and CFOs of insurance companies representing over $13 trillion in assets.  

Insurance companies are more optimistic about the global investment landscape than they have been since 2016. The survey found that 51% of respondents plan to increase their exposure to private assets, with 29% planning to increase their private equity exposure and 28% looking to add more infrastructure equity and debt. 

Other notable insights include a contrast to last year as 28% of insurers plan to significantly increase duration exposure, consistent with the market pricing in rate cuts by early 2024. Meanwhile, the hope of “transitory” inflation is receding, as 81% of insurers believe it will remain through the medium-term (2-5 years) or long-term (5-10 years). The respondents cite deglobalization (44%) as the top factor driving structurally high inflation followed by energy disruption (33%). 

Most insurers (82%) believe a US recession will occur within the next three years. Yet, 29% plan to increase risk in their portfolios. A potential renaissance for fixed income is underway as 34% plan to up their exposure to US investment grade corporate bonds this year. 

“Despite uncertain market conditions, we believe there are real opportunities for investors across private and public markets, particularly in credit, where increasingly attractive yields in fixed income have lured back insurance investors,” noted Michael Siegel, Global Head of Insurance Management and Liquidity Solutions at GSAM. 

In a reversal of prior years, credit quality deterioration was cited as a primary risk (39%), while 90% of respondents considered ESG factors to be at the forefront of allocations.