Insurers Further Embrace Private Assets, Especially Private Credit

Approximately 62% of insurers plan to increase their private markets allocations, according to a survey of insurance CIOs conducted by Goldman Sachs.

Insurance investors have leaned further into private assets in the last several years, and they are expected to embrace alternatives even further in 2025, according to a survey of insurance investors conducted by Goldman Sachs Asset Management.

Based on the report on the firm’s 14th annual global insurance survey, “The Great Pivot,” approximately 62% of surveyed CIOs and chief financial officers of insurance companies plan to increase their firms’ allocations to the private markets this year, with private credit expected to be a driver of returns for the rest of the year.

GSAM surveyed 338 insurance CIOs and senior investment professionals, 53 CFOs and 14 individuals who serve in both roles. Survey participants represented more than $14 trillion in assets under management, about half of all global insurance AUM. The survey was conducted between January 16 and February 7.

“Our 14th Annual Global Insurance Survey shows insurers are navigating evolving macroeconomic concerns by rotating toward asset classes with the potential to provide both attractive risk-adjusted returns and diversification benefits,” said Mike Siegel, GSAM’s global head of insurance asset management and liquidity solutions, in a statement. “Amid this industry-wide rotation, important new trends in liquidity management may be developing.”

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According to GSAM’s research, insurance investors feel the biggest macroeconomic risk to their investment portfolios include inflation, with 52% of respondents pointing to this as a concern, economic slowdown or a recession in the U.S. (48%), credit and equity market volatility (47%), geopolitical tensions (43%) and tariffs and trade disputes (32%).

The biggest concern among investors in the Americas and in the Asia Pacific region was the risk of an economic slowdown in the U.S. European investors reported being most concerned with geopolitical tensions.

Asset Allocation and Portfolio Construction

Over the next 12 months, about 35% of survey respondents said they would maintain their portfolio allocations to private market asset classes, while 3% of respondents said they would decrease those allocations.

In the 2024 survey, 56% reported planning to increase their allocations over the next 12 months, up from 51% in the 2023 survey. In 2024, 38% said they would maintain their allocations, while 43% said they would maintain their allocations in the 2023 survey. In both 2023 and 2024, only 6% of respondents said they intended to decrease their private asset allocations.

Goldman asked insurers to what asset classes they plan to increase their allocations over the next 12 months. Four out of the five asset classes named by the most respondents were in the private markets. Approximately 58% of respondents said they plan to increase their allocations to private credit, followed by investment-grade private debt (40%), asset-based finance (36%), infrastructure debt (32%) and private equity (29%).

Only 17% of surveyed insurers said they plan to increase their allocations to U.S. equities, although more than half of insurers (57%) reported expecting the asset class to be the second-highest returning asset class over the next 12 months. Insurers also said they expect private credit to have the highest return, with 55% of respondents putting the asset class in the top spot.

Approximately 55% of investors said private equity would be the third-best-performing asset class, followed by private equity secondaries (30%) and high-yield debt (28%).

The insurers surveyed expected the worst-performing asset classes over the next 12 months to include green and impact bonds (46%), cash and short-term instruments (43%), municipal bonds (37%) and emerging market equities (31%).

Insurance investors also said they are likely to decrease their allocations to cash and short-term instruments over the coming year, with 31% of survey respondents indicating they would do so, the highest decrease of any asset class. Government and agency debt was next, with 21% of respondents indicating they would cut these allocations, followed by investment-grade corporate debt (19%), high-yield debt (17%) and real estate equity (16%).

Nearly Half Using AI

Some 48% of respondents reported using artificial intelligence in their work, an increase from the 2024 survey, in which 39% of respondents said they did, according to the survey results.

The percentage of respondents that said they are considering using AI fell to 42% in 2025 from 51% in 2024, while the percentage of respondents who said they would not consider using AI fell to 10% in 2025, from 20% in the 2024 survey.

Eighty-one percent of respondents said their company uses or is considering using AI to reduce operating costs. Other uses of AI by insurers were insurance risk underwriting (44%), marketing and client acquisition (36%) and evaluating investments (29%), according to the survey.

ESG and Impact Investing

Per the 2025 survey, 41% of respondents in the Americas said that investing based on environmental, social and governance considerations or impact investing was an investment consideration, up from 15% in 2022, with a majority of investors saying it was one of several considerations. No investors in the Americas said it was a primary consideration in its investments.

Among investors in the Europe, Middle East and Africa region, only 1% of survey respondents said ESG was not an investment consideration, while 19% said it was a primary consideration. Eighty percent said it was one of several considerations.

In Asia Pacific, ESG was considered one of several investment considerations by 89% of respondents, while 5% said it was not a consideration at all, and 6% said it was a primary consideration.

Insurers Continue to Seek Greater Private Markets Exposure

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Tags: AI, asset allocation. Private markets, ESG, Goldman Sachs, Goldman Sachs Asset Management, insurance, Michael Siegel, Private Credit

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Investors are flocking to infrastructure and real assets for their similarities to fixed income and the diversification they can bring to a fixed-income portfolio.

“While fixed income can often play a critical role in portfolio construction, the addition of asset classes such as infrastructure and real assets can provide significant diversification benefits,” says Ken Shepard, head of specialty asset management at Bank of America.

Over the past decade, according to a recent report from Boston Consulting Group, infrastructure assets under management quadrupled, to a high of $1.3 trillion, as of June 2024.

“Infrastructure remains a cornerstone of private investment strategies, offering stability and inflation protection in volatile markets,” said Wilhelm Schmundt, senior partner and managing director at BCG, in a statement. “As investors adjust to a maturing market, we see significant opportunities emerging in energy transition, digital infrastructure, and new investment structures designed to attract capital.”

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Infrastructure is expected to be a good fit for the economic volatility that threatens to continue for the remainder of the year.

“In our view, infrastructure returns are likely to be in the 11-12% range next year, which is above their long-term average, but consistent with what the asset class has achieved in prior periods in which interest rates were falling and GDP growth accelerating,” Macquarie Asset Management stated in its 2025 outlook.

Real assets such as timberland and farmland, Shepard says, can provide significant diversification benefits because they exhibit very low correlation to investment-grade fixed income.

“While unexpected inflation may cause interest rates to rise, potentially devaluing existing fixed-income holdings, timberland has long functioned as an excellent inflation hedge,” Shepard says. “Trees grow, regardless of market conditions, appreciating in both volume and value, which helps timberland retain its appeal during periods of economic uncertainty.”

A white paper from PGIM noted that institutional investors like real assets because of three main characteristics it offers: diversification, return enhancement and inflation hedging.

The paper noted that, relative to a stock/bond benchmark, portfolios that hold real assets have performed well during periods of rising and high inflation, but the same assets can be a drag on portfolio performance outside of these periods.

PGIM suggested a dynamic real asset allocation strategy, in which an investor allocates to the asset class only when inflation is high and rising, which, the firm wrote, can generate positive returns during these periods, while foregoing periods of underperformance.

AI Infrastructure, Energy Transition

Hyperscalers—the companies such as Meta, Google and Amazon that are building large-scale data centers—and infrastructure managers are set to invest hundreds of billions of dollars into data centers and other infrastructure for both the artificial intelligence boom and the transition away from fossil fuels.

According to market research firm Dell’Oro Group, global capital expenditures for AI data centers and related infrastructure reached $455 billion last year, a 51% increase from 2023.

“There’s going to be a lot of demand for infrastructure,” says Anders Persson, Nuveen’s CIO of fixed income. “If you think about the AI push that we’re seeing, that is resulting in more need for bandwidth for data centers. That filters into utilities and infrastructure support more broadly.”

According to a white paper from the BlackRock Investment Institute, energy investments in the U.S. are set to increase annually to $3.5 trillion by the end of the decade and $4.5 trillion in the 2040s from its current level of $2.2 trillion.

Insurers Further Embrace Private Assets, Especially Private Credit

Infrastructure, Real Assets Make Attractive Additions to Fixed-Income Portfolios

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