Insurers plan to up PE allocation

Insurance companies also expect the highest returns to come from private equity compared with other asset classes.

Insurance firms continue to rate private equity as the asset class with the highest potential returns, according to Goldman Sachs Asset Management’s 2017 Insurance Survey.

Private equity dominated the ranking of various asset classes based on their potential returns for the fourth consecutive year, with 27 percent of insurers picking it as their first choice, according to the survey released on Thursday. US equities followed at 20 percent, emerging market equities at 13 percent and commodities at 5 percent.

The number of insurers anticipating the highest returns from private equity reflects a sharp increase from the 2016 survey, in which 17 percent of respondents indicated such expectations, as previously reported by Private Equity International.

Private equity was also the most popular asset class for an increased allocation in the next 12 months, with 34 percent of respondents saying they intend to do so. This was also an increase from last year, when 24 percent of respondents planned to raise their allocation to private equity.

Mid-market corporate loans and infrastructure debt were also in-demand, with 32 percent of the insurers saying they would increase their allocation to each of these asset classes.

“While expressing rising optimism about their investment prospects, insurers anticipate increasing their asset allocations to higher yielding and less liquid asset classes such as private equity, mid-market corporate loans, infrastructure debt and collateralised loan obligations” due to their increased confidence in the expected returns of growth-related asset classes, GSAM said in a statement accompanying the survey.

GSAM surveyed chief investment officers and chief financial officers at 317 insurers, with 179 of them from the Americas, 80 from Europe, the Middle East and Africa, and 58 from Asia-Pacific. GSAM managed over $230 billion in insurance assets as of 31 December.