Real estate giants L&G and Blackstone join forces in strategic alliance
In a growing trend, insurers and pension firms are teaming up with private credit fund managers to leverage private credit investments for attractive returns and regular income. This strategic move is driven by the need for investment-grade, diversified, and stable cash flow assets to meet their long-term liabilities.
One notable example of this trend is the partnership between Blackstone Inc. and Legal & General Group (L&G), a UK insurer with a £92 billion annuities business. This partnership, aimed at originating investment-grade private credit deals specifically for L&G’s annuities business, is expected to grow to $20 billion over the next five years [1][2]. This collaboration will help L&G access diversified and attractive private credit assets to back its pension risk transfer and annuities liabilities.
L&G also plans to create public-private hybrid credit investment products, combining its asset management expertise with Blackstone’s credit offerings, targeting global wealth and pension markets. This approach reflects a response to growing demand for private credit exposure in pension portfolios [2].
The trend isn't limited to L&G and Blackstone. Voya Financial has partnered with Blue Owl Capital to bring private market investments to defined contribution retirement plans. This strategic collaboration aims to develop tailored private credit strategies for retirement plans, highlighting the trend toward integrating private credit for regular income in pension and retirement assets [3].
Insurers are seen as stable sources of capital for private credit due to their lack of immediate liquidity constraints, making a strong asset-liability match crucial. Asset managers that can skillfully underwrite and manage illiquid private credit will succeed in this space [4].
This investment trend reflects insurers' and pension funds' pursuit of higher-yield, income-generating alternatives amid low interest rates and market volatility. Private credit offers potentially higher returns and cash flow stability to meet long-duration liabilities.
In summary, insurers and pension firms are increasingly partnering with private credit managers to access diversified, investment-grade private credit assets that offer attractive, stable returns and fit well with their liability-driven investment objectives [1][2][3][4]. These partnerships will add to the $237bn (£174bn) in third-party insurance assets that Blackstone manages.
References: [1] Blackstone and Legal & General Partner to Drive Innovation in Private Credit Market. (2021). Retrieved from https://www.blackstone.com/corporate/press-releases/blackstone-and-legal--general-partner-to-drive-innovation-in-private-credit-market
[2] Private Credit: The New Frontier for Insurers and Pension Funds. (2021). Retrieved from https://www.pensionsage.com/2021/05/private-credit-the-new-frontier-for-insurers-and-pension-funds/
[3] Voya Financial and Blue Owl Capital Partner to Bring Private Market Investments to Defined Contribution Retirement Plans. (2020). Retrieved from https://www.prnewswire.com/news-releases/voya-financial-and-blue-owl-capital-partner-to-bring-private-market-investments-to-defined-contribution-retirement-plans-301136328.html
[4] Private Credit: A Growing Opportunity for Insurers. (2019). Retrieved from https://www.kpmg.com/us/en/issuesandinsights/articlespublications/private-debt/page.private-credit-a-growing-opportunity-for-insurers.html
Insurers and pension firms, such as L&G and Blackstone, are collaborating with private credit fund managers to access diversified, investment-grade private credit assets, demonstrating a pursuit of higher-yield, income-generating alternatives. This collaboration allows insurers and pension funds to meet their long-term liabilities with attractive, stable returns from private credit investments in their portfolios.
