Insurers boost private assets allocations as capital increases

A new global study* from Ortec Finance among insurance investment managers shows an increased appetite for private assets on the back of an expected rise in capital to invest in the year ahead.

More than three quarters of insurers and insurance asset managers say an increase in capital to invest in their organisation is definite or likely in the year ahead. Only 2% think it will definitely not happen.

The study with investment managers responsible for $10.48 trillion assets under management found two thirds of them believe private debt will see the biggest percentage increase in allocation, followed by private equity and real estate.

However, the study from Ortec Finance, the leading global provider of risk and return management solutions for insurers and other financial services companies, reveals concerns that the level of transparency and reporting from private fund managers is often not robust enough. More than a fifth (21%) of those polled strongly agree that these issues prevent insurers from investing in some private funds because they cannot show they are compliant with the regulations they face. 79% slightly agree.

Inflation protection is regarded as the most important reason to invest in private assets, chosen by 35%, ahead of 30% who selected diversification, while 22% chose cashflow matching and 13% returns and illiquidity premiums.

Around 62% expect distributions for private equity – the means by which private equity funds return capital to investors – to be higher in the future. Around 35% expect them to remain at the same level as in recent years.

The table below shows the percentage of insurance investment managers and investment managers working for insurers selecting private asset classes among the top three most likely to see the biggest increases in allocations over the next 12 months.

Hamish Bailey, Managing Director UK, and Head of Insurance & Investment said: “The study highlights continued momentum behind private asset allocation, with many insurers expecting to see an increase in capital to invest in the year ahead.” 

“The motivation is driven by the search for inflation protection in real world assets, diversification benefits, and a long-term focus.”

“However, transparency and reporting remain key barriers. Without robust data and disclosures from private fund managers, many insurers face regulatory hurdles limiting their ability to fully capitalize on these opportunities.”

“Ortec Finance supports insurers and asset managers with advanced scenario analysis, balance sheet simulation, and portfolio optimisation tools that take account of dynamic asset/liability interactions, liquidity and solvency constraints and market uncertainty to help make resilient investment decisions.”