World Economy

Investors Diversifying Toward Private Assets

Investors Diversifying Toward Private AssetsInvestors Diversifying Toward Private Assets

Global insurance firms are making a significant move toward private market assets to diversify against the risks that have traditionally underpinned their businesses, said BlackRock, a global financial services giant.

The number of insurers with over 15 percent of their portfolio in private market assets had more than quadrupled to 26 percent from six percent three years ago, and is expected to nearly double again to 46 percent by 2017, said BlackRock in a research report commissioned to the Economist Intelligence Unit, Xinhua reported.

Insurers are citing the weak global economic growth, inflation risk and regulation risk as the three biggest macro risks, and reckon that prolonged low rates environment is the biggest market risk that they have to face, according to the report.

Over the next three years, insurers continue to look beyond investment grade fixed income to the spheres such as private equity, infrastructure and real estate, though fixed income remains at the core allocation assets of their portfolio, said BlackRock.

And among those risk takers, 68 percent are hoping to replace and enhance investment income, while 66 percent point to the diversification benefits it would afford.

David Lomas, global head of BlackRock’s insurance asset management unit, said, “It used to almost be ‘buy your bonds in the morning and relax in the afternoon’, but insurers are now faced with a far more complex operating environment.”

“This research shows that insurers are having to make a great migration toward private markets to diversify income streams and maintain returns on equity,” he added.

The research report is based on the survey of 243 senior executives from insurance and reinsurance companies worldwide.