Asia-based Insurance Companies Investing in Private Equity – February 2014

by Cheng Jia Ong

  • 18 Feb 2014
  • PE

In an effort to diversify away from traditional assets that yield low returns such as government bonds, insurance companies are increasingly keen to gain exposure to the private equity asset class. Insurers are in pursuit of assets that not only match their long-term investment horizon, but generate higher returns as well. As such, insurance companies are likely to review their investment strategies and increase their allocation to private equity going forward. Preqin’s Investor Intelligence database currently tracks 58 Asia-based insurance companies investing in the private equity asset class. The aggregate total assets of these Asia-based insurance companies that invest in private equity is approximately $4.4tn. 

Japan is home to the largest proportion of Asia-based insurance companies investing in private equity, with 31% of the corpus located in the country. South Korea represents the next most significant location at 26%, followed by India at 14%. China and Taiwan are each home to 7% of this investor pool, while the remaining 15% is split between other countries such as Cambodia, Hong Kong, Malaysia, Singapore, Thailand and Vietnam. It is worthwhile to note that the top three Asia-based insurance companies investing in private equity, ranked by total assets, hail from Japan. The largest of these is Nippon Life Insurance Company which has assets under management of over $622bn. Nippon Life Insurance Company targets a wide range of fund types such as buyout, growth, mezzanine, secondaries, venture capital and distressed vehicles. It also invests in multiple geographic regions such as Asia, Australasia, Europe and North America. 

Buyout is the most preferred fund type for this investor pool, attracting a hefty 68% of all Asia-based insurance companies. The next most targeted fund type is growth at 61%, followed by venture capital (45%), distressed debt (34%) and funds of funds (32%). These Asia-based insurance companies also have a preference for vehicles such as secondaries (27%), mezzanine (25%), special situation (23%) and turnaround (23%).                                                          

In terms of geographic preferences, 32% of Asia-based insurance companies are seeking investment opportunities in China, followed by South Asia (24%) and ASEAN (12%). Overall, 42% of Asia-based insurers investing in private equity have an investment mandate that strictly targets only the Asia region. This indicates that a considerable 58% of the corpus seeks a wider exposure when investing in this particular asset class. A significant 83% of the investors that will target overseas investments in private equity funds, target North America as an investment destination, while 62% target Europe.  Other favoured markets include South America (10%) and Australasia (10%). This reveals that both domestic and overseas markets form a critical part of Asia-based insurers’ strategic allocation to private equity.

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