Insurance investment management companies play a crucial role in deploying insurance funds into various asset classes and financial markets. With trillions of dollars in assets under management, top insurance investment managers are influential participants in capital markets globally. Understanding the landscape of major insurance investment managers and their core competencies provides valuable insights into the asset allocation trends and risk exposures of insurance balance sheets. This article will analyze the key players, business models, and investment focuses of leading insurance investment management firms in the US.
Bridgewater, PIMCO and BlackRock lead in insurance investment management
According to data from Willis Towers Watson’s year-end 2020 survey, the top 3 insurance investment managers in the US are Bridgewater Associates, PIMCO and BlackRock, with $202 billion, $193 billion and $147 billion in insurance assets under management respectively. Bridgewater is known for its Pure Alpha Fund and expertise in macro investing and risk parity strategies. PIMCO has strong capabilities in fixed income, particularly credit and structured products. BlackRock is a leader in indexing, iShares ETFs and factor-based allocations. Other major investment managers like Apollo, KKR, Oaktree, Brookfield and Carlyle also manage significant insurance assets through their private market and credit investment platforms.
Insurers focus on core fixed income, alternatives and private assets
The asset allocation of insurance investment portfolios in the US is heavily weighted towards fixed income, especially investment grade bonds. Core fixed income mandates account for over 50% of insurer assets at top managers. However, insurers are increasingly allocating to alternative, illiquid assets like private equity, real estate and infrastructure to enhance yields. According to Willis Towers Watson, private equity, real estate, infrastructure and hedge funds together represented 17% of insurer assets in 2020, up from 13% in 2016. Insurers partner with private market specialists like Apollo, KKR and Blackstone, as well as multi-strategy firms like Oaktree, to gain exposure to these asset classes.
Importance of ESG integration for insurance investment management
Incorporating ESG factors into investment analysis and portfolio management has become an imperative for insurance investment managers. Top firms like State Street Global Advisors, Nuveen and UBS Asset Management leverage ESG integration, screening and thematic strategies to help insurers meet regulatory requirements, demonstrate social responsibility and mitigate ESG risks in their portfolios. There is also growing demand from insurers for investment solutions that align with their climate goals, such as low-carbon indexes and green bond funds. Insurance investment managers need advanced ESG capabilities to retain and grow insurer assets.
Consolidation among insurance investment management firms
The insurance investment management sector has seen significant M&A activity recently, driven by scale advantages and insurers consolidating relationships. Notable deals include Victory Capital’s acquisitions of USAA Asset Management, THB Asset Management and Magnetar Capital. In 2020, Franklin Templeton completed its acquisition of Legg Mason with its specialty investment affiliates. Consolidation allows investment managers to expand their capabilities, fund offerings and distribution channels to better serve insurance clients. Smaller investment firms lacking scale or product breadth face challenges in retaining insurer mandates.
Major insurance investment management firms like Bridgewater, BlackRock and Apollo hold trillions in insurer assets. Insurers rely on these managers for core fixed income as well as alternatives and private market exposure. Leading investment managers emphasize ESG integration to meet insurer demand. Consolidation for greater scale and breadth of capabilities continues across the sector.