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March 10, 2014 at 07:33 AM
(Bloomberg) — Northwestern Mutual Life Insurance Co., the No. 2 seller of the coverage in the U.S. last year, is turning to property investments and private deals after scaling back from stocks during last year’s rally.
“We feel the equity markets are a little bit frothy,” Ron Joelson, Northwestern Mutual’s chief investment officer, said in an interview. “In the private-equity markets and in real estate, particularly in certain areas, we’re just seeing more value than we are in common stock.”
Joelson, 55, is seeking to squeeze more income out of Milwaukee-based Northwestern Mutual’s $184.4 billion portfolio without taking on too much risk. His options are limited, with U.S. bond yields near record lows and stock valuations above the average of the past decade.
Northwestern Mutual cut stock investments by almost a third last year to $2.97 billion, as the Standard & Poor’s 500 Index jumped 30 percent. Mortgage-loan holdings rose by $2.5 billion to $26.8 billion, while private-equity investments made up about 3 percent of the company’s assets. Joelson said he’d like to boost the ratio to 4 percent, though it may be a struggle to find the right bets.
The insurer favors private investments in more mature companies, typically avoiding venture capital deals and technology firms, Joelson said.
“In the private-equity world, we’re probably more on the conservative end,” Joelson said. “The more boring, the better for us.”
Offices make up 31 percent of Northwestern Mutual’s real estate loans, retail buildings account for 30 percent and apartments are 27 percent. Joelson said multifamily properties provide “a lot of value” and can be more resistant to slumps.
‘Good Resiliency’
