Alternative Opportunities for Insurers

In our Q4 2024 edition of Alternative Opportunities, we continue to cover views on a variety of private asset classes from Invesco Solutions and our partner firms. Within this piece, we’ll present a framework for analyzing across alternative markets to help inform insurers’ investment decisions.

Private credit

We remain constructive on private credit for insurance portfolios given the spread pickup available for taking on illiquidity and /or complexity risk, particularly considering most insurers maintain ample liquidity relative to their liability profiles. We also find alternative credit to be a compelling diversifier relative to public corporate bond exposure which is heavily represented in most insurance portfolios.

Private equity

Conditions for LBO activity may be improving; however we are still cautious on private equity relativeto private credit considering alternative allocations are limited and private credit likely offers more attractive risk-adjusted returns. For insurers seeking higher-return strategies, distressed / special situations may be a better place to deploy capital – namely, situations where capital solutions for otherwise-solid businesses are needed.

Real assets

We continue to maintain a neutral stance on real asset exposure overall. While the asset class remains challenged, we believewe are close to the bottom for valuations. As long-term investors, insurers allocating to the space now may benefit from attractive forward-looking returns, particularly in light of a moderating interest rate backdrop. We do see added tailwinds for infrastructure – significant investment needs globally and strong fundamentals in sectors such as transportation – and debt strategies can be particularly attractive to insurers seeking long duration for asset-liability management and capital-efficient exposure.