We believe private credit markets—now with nearly $1.8 trillion in assets under management across an array of subsectors1—have the potential to offer attractive structural advantages for many institutions, especially insurance companies. In this paper, we discuss the rise of private credit, the potential merits of this burgeoning asset class, and why we believe it should continue to play an important role in insurance portfolios.
In our view, private credit’s broad menu of strategies can help insurers satisfy their specific risk-return requirements at a compellingly granular level. Private-credit investors now can select sub-asset classes that match their required duration, seniority, credit quality or preferred collateral type. And even as yields on public debt have risen, we believe private-credit markets continue to offer insurers an array of structural advantages—including a meaningful illiquidity premium, lower drawdowns, and favorable solvency capital requirements, among others.
As private credit—in all its forms—continues to evolve, we believe this asset class will give insurers more tools for tailoring their portfolios to meet their specific risk/return requirements.
For a closer look at various strategies across the private-credit landscape, please see Private Credit: An All-Weather Asset Class