Insurers expect PE to outperform – survey

The Schroders Institutional Investor Study 2019 found that 28% of the insurers surveyed expect private equity to generate returns greater than 10%, 35% of the respondents see PE delivering between 6-10%, and 22% said that returns would below 5%.

Meanwhile, 19% of insurers expect infrastructure to deliver more than 10% returns, while 46% of the responders believe that the asset class will return between 6-10%.

The study also found that insurers currently allocate the largest proportion of their private assets' portfolio to private debt, followed by real estate, real estate debt, and private equity.

Among the key reasons for investing in private markets were diversifying the portfolio, generating high returns and better managing risk.

The study also reveals that 56% of the insurance companies expect to increase their allocations to private assets over the next three years.

Insurers have also put sustainability on their radars, with 78% of the respondents expecting it to play a bigger role in their portfolios over the next five years.

However, the survey also found that insurers' confidence in achieving return expectations has dropped since 2017. This is a result of the uncertainty in the macroeconomic climate and expectations of geopolitical turbulence.

"It is encouraging that, despite these challenges, insurers are not afraid of diversifying their investment portfolios," said Gavin Ralston, Schroders' head of insurance asset management. "Private assets – in particular private equity and infrastructure equity – are increasingly in demand, with the added stimulus of better capital treatment in Europe for long-term equity investments."

More information about the study can be found here.

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