KKR’s Henry McVey Says Insurance CIOs Plan to Increase Allocations to Non-Traditional Assets
Proprietary Survey Highlights Why There is “No Turning Back” to Traditional Asset Allocation After the Recent Surge in Interest Rate Volatility
Based on a proprietary survey of nearly 50 Chief Investment Officers (CIOs) who collectively oversee over more than
“The clear message we drew from our 2024 insurance survey participants is that there is “no going back” to more traditional approaches to asset allocation. Having endured huge fluctuations in central bank policies in recent years, CIOs are now more comfortable embracing investment strategies outside of traditional fixed income instruments that are helping to not only generate better returns but also diversify their risk profiles in today’s increasingly complex world,” said McVey.
More detailed conclusions for asset allocation include:
- Given the rise in interest rates, allocations to Investment Grade debt have increased but have not rebounded to peak levels seen in 2017.
- However, despite the record increase in interest rates in recent quarters, insurers' allocations to non-traditional investments, including Alternatives, declined only slightly to 28.9% in 2024 from 31.8% in 2021, but were still well above 20.3% in 2017.
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Within non-traditional investments, allocations to Structured Credit, such as CLO Debt, Asset-Based Finance, and other tradeable structures, increased the most, from 5.9% of portfolios in 2017 to 8.3% in 2024, with
U.S. insurers having the highest allocations to the asset class. - Private Credit allocations, which jumped to 7.7% in 2021, fell back to their 2017 levels of around 5.3% as CIOs shifted their portfolios to take advantage of higher yields in more liquid products as rates increased. However, Private Credit remains attractive to CIOs, with most choosing the asset class as their top choice for future allocations.
- Infrastructure and Private Equity also rank high on the list for future allocations, and CIOs are now finally seeing more opportunity in Real Estate Equity after the recent compression in values.
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Asset allocation priorities vary by type of insurer. On average, Life and Annuity CIOs tend to allocate more to Structured Credit and Real Estate Credit, while Property and Casualty CIOs tend to hold more than the average in Private Equity,
Public Equities , and Bank Loans and High Yield. -
Similarly, allocation preferences vary by region, with
Europe -based CIOs allocating more to Private Credit and Infrastructure, whileAsia -based CIOs are leaning more heavily into Real Estate Credit.
Links to access this report in full as well as an archive of
- To read the latest Insights, click here.
- To access the 2021 Insurance survey, click here.
- For an archive of previous publications please visit www.KKRInsights.com.
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KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR’s insurance subsidiaries offer retirement, life and reinsurance products under the management of
The views expressed in the report and summarized herein are the personal views of
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Source: KKR