GSAM Survey: Global Insurers Expect Best Returns From Private Equity

Apr 19 2016 | 9:50pm ET

by Carolyn Cohn (Reuters) - Global insurers expect private equity to produce the highest returns in the next year and a quarter plan to increase allocations to the asset class, a Goldman Sachs Asset Management survey showed on Wednesday.

Insurers are seeking ways to increase returns as continued bond-buying across the developed world has depressed yields on government bonds, traditionally their preferred source of investment income.

"The continuation of quantitative easing in Europe, Japan and the U.S. means returns in all asset classes are coming down," Mike Siegel, global head of insurance asset management for GSAM, told a news briefing.

Siegel highlighted a "significant increase" in plans for riskier investment by European insurers, a year after the European Central Bank started its QE program.

Seventeen percent of the 276 insurance chief investment officers and chief financial offers surveyed saw private equity delivering the highest returns in the next 12 months.

In contrast, emerging market equities would show the worst performance, according to 25 percent of the insurers.

A net 24 percent of the insurers, who represent over $7 trillion in balance sheet assets, planned to increase allocations to private equity in the next year, and the same percentage said they would add to positions in U.S. investment grade corporates and infrastructure debt.

However, the insurers planned to cut positions in emerging market local currency corporate and sovereign debt and in cash.

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