The party’s not over for buyout firms.
After a record year for private equity fundraising, more than a third of insurers want to increase allocations to that asset class, according to a Goldman Sachs Group Inc. survey released Tuesday. Nearly half of investment chiefs and chief financial officers responding to the survey ranked private equity in the top three of asset classes they expect to deliver the highest returns in the coming 12 months.
With volatility returning to markets earlier this year, insurers in the U.S. are looking to cut back risk in investments, even as rivals in Europe and Asia expect to increase it, according to the survey. That desire to scale back risk in portfolios may be due to high equity valuations and tightening monetary policy, as well as a feeling that the U.S. is getting toward the latter part of the credit cycle, said Goldman’s Mike Siegel, who oversees almost $260 billion of funds for the industry.
“The increase in volatility has been a bit of a wake-up call and it’s made companies be a little bit more concerned,” Siegel, who oversees the insurance division at Goldman Sachs Asset Management, said at a briefing in New York. The global survey, conducted earlier this month, covered 300 insurers that together manage more than $10 trillion in assets.
While insurers may be bullish on private equity, it’s a different story for hedge funds. Just 8% of respondents said they planned to increase hedge fund investments. In 2016, insurers including American International Group Inc. and MetLife Inc. were decreasing those allocations, and Siegel said the outlook hasn’t shifted much.