-- A couple of years ago Clive Cowdery had a problem. The large life insurer that he’d founded was amassing customer cash faster than it could find ways to put that hoard to work.As payments piled up at Resolution Life, two of every three dollars sat idle. The company decided it couldn’t hang around for its in-house crew to scour the globe for the bonds, mortgages and other assets in which insurers typically invest people’s money. So it turned to Blackstone Inc .
Much of this money is fueling the boom times in private credit. Wall Street banks used to be the chief providers of company loans, but post-crisis capital rules have made this harder, letting “nonbanks” like Blackstone muscle in.
The firm manages more than a dozen accounts with blue-chip insurers, who set the rules on where Blackstone can invest. Many opt for “multi-asset” pools, which can be made up of a mix of loans and more complex securities such as infrastructure debt and structured finance. Blackstone wants to do similar work for pensions and sovereign wealth funds.
The top tier of asset managers have “certainly been opportunists,” says Joshua Zwick, a partner at Oliver Wyman who consults for investment firms and insurers. “This is a natural evolution of the financing markets that could put risk on balance sheets and investment portfolios best suited for such risk.” Firms such as Ares Management Corp. and Carlyle Group Inc. have also made inroads with the insurance industry.
Dellaert describes Blackstone’s bank ties as having many facets. “We need them for a lot and they now need us for more, incrementally,” he says. “We see things become very symbiotic very quickly.” It’s all very different to Blackstone’s early days as a credit player after it snapped up GSO Capital Partners in 2008, a deal that captured Wall Street’s shifting zeitgeist. While banks were being told to abandon their wilder ways after Lehman Brothers’ demise, lightly policed money managers picked up the baton on the sharp-elbowed tactics and financial wizardry exemplified by GSO.
Source: Loan Digest (loandigest.net)
Bloomberg Private Credit Insurers Private Markets Jon Gray
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