BlackRock sees insurers betting on credit, paring private equity
BLACKROCK said insurance executives overseeing US$29 trillion plan to pour more money into private debt and credit strategies while cutting back on private equity and real estate.
Of 378 senior insurance executives surveyed by BlackRock, 89 per cent said they plan to invest more in private markets during the next two years, according to a report set for publication on Wednesday (Sep 27). Within private assets, they expressed the most enthusiasm for direct lending, with 60 per cent of those surveyed planning to boost allocations.
Meanwhile, 34 per cent said they will pull back on private equity. A similar percentage of executives said they will trim bets on real estate equity and debt.
“Insurers still want to increase their allocations to private markets – they still broadly feel like they are under-allocated,” Mark Erickson, global head of BlackRock’s financial institutions group, said in a phone interview. But given market volatility and disruptions in private equity and real estate, he added, “There is some greater selectivity.”
Institutional investors have been navigating higher interest rates since March of last year. The resulting rout in stocks and bonds as well as some markdowns and lower distributions on private equity assets have spurred investors to prioritise flexibility when allocating assets.
“In the world before 2022, where every bond was in an unrealised-gain position, you could rotate whenever you saw the opportunity,” Erickson said. “Now that you are sitting on unrealised losses, now you don’t have the freedom to do that.”
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Still, the ability to get yields of 5 per cent or more on government and corporate bonds hasn’t dampened interest in private assets, according to BlackRock, which manages more than US$550 billion of general insurance account assets.
Insurers are particularly eager to boost holdings in the highest-quality investment-grade private debt and asset-backed strategies as well as to direct lending to small- and medium-size businesses.
BlackRock, the world’s biggest money manager, increasingly seeks to position itself as a one-stop shop for investors offering equity, bond and money-market funds as well as alternative assets.
The company reorganised its alternatives unit this year to create more specialised teams, including for private credit, and acquired Kreos Capital, a London-based private debt manager, to capitalise on the expected growth in the assets. BLOOMBERG
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