Preqin’s Private Debt Online database tracks 135 insurance companies with a preference for private debt funds, representing aggregate assets under management (AUM) of $9.6tn. Clearly this is a significant source of capital for private debt fund managers on the fundraising trail, but which strategies in particular may benefit from this in 2015?
Mezzanine is the most favoured investment strategy among insurance companies globally investing in private debt, including Prudential Financial, AXA Wintherthur and Fubon Life. As shown in the chart below, 75% have a preference for mezzanine debt and 53% have a preference for direct lending. Just under half (46%) of insurance companies investing in private debt state a preference for distressed debt funds, while just under a quarter (24%) have a preference for special situations vehicles.
Looking at insurance companies located in North America, 57 target mezzanine debt funds. These insurance companies have a combined AUM of approximately $5tn, the largest of which is Prudential Financial, which has $1.2tn in total AUM. Prudential Financial also targets distressed debt, direct lending and special situations funds. Among insurance companies based in Europe, 29 target mezzanine debt. These companies have a combined total AUM of approximately €1.3tn ($1.4tn), the largest being AXA Wintherthur. The Switzerland-based company has €82bn ($92bn) in total AUM.
In respect to insurance companies located outside the US and Europe, 15 target mezzanine debt. These insurance companies have a combined AUM of approximately $492bn. The largest of these companies is Fubon Life Insurance. The Taiwan-based insurance company has $87bn in AUM, and also targets distressed debt, direct lending and special situations funds.
From a geographical perspective, 51% of insurance companies with a preference for private debt funds invest in North America, while 32% invest in Europe and 17% invest in other regions across the globe. Of those that invest in North America, 87% target mezzanine debt funds. With respect to Europe, 67% target mezzanine debt, and among the remaining regions across the globe, 61% target mezzanine debt.
From this analysis it appears that mezzanine debt currently has a firm grasp on investor preference among insurance companies. As North America, Europe and other regions continue to target mezzanine debt for investment, it will be interesting to see if this is maintained or if preferences shift towards other fund types.