Trend watch

Insurers flock to private debt, the latest asset manager deal and mid-market strength

Investors rush to credit
The rush to private credit is continuing among insurers. According to a survey from Goldman Sachs these instituti3ons are convinced the asset class is in the late stages of the credit cycle. Credit strategies were four of the top five strategies to which insurers planned to allocate more funds.

Although private equity posted the biggest expected net increase in the next 12 months (32 percent), second and third place went to infrastructure debt and commercial mortgage loans, which had anticipated net increases of 27 percent and 22 percent respectively. Mid-market corporate loans and collateralised loan obligations took fourth and fifth place, with forecast net increases of 21 percent and 17 percent.

“The takeaway from the survey is that [insurance companies] are going to private credit in multiple forms,” says Matthew Armas, global head of insurance fixed-income portfolio management at Goldman Sachs Asset Management. He points to the “continued allocation” to infrastructure debt and real estate debt, as well as corporate loans, both in investment-grade businesses and mid-market companies.

‘Fund of firms’ boom continues
Jefferies Financial Group and Stonyrock Partners have become the latest firms to launch a platform taking minority stakes in alternative asset managers. Leucadia Asset Management, part of Jefferies, said it had partnered with Stonyrock to raise a permanent capital vehicle dedicated to the strategy, in which GPs and LPs have shown increasing interest. Stonyrock is a new firm founded by Craig Schortzmann, former managing director at Blackstone Alternative Asset Management, and Sean Gallary, former head of The Carlyle Group’s AlpInvest Partners.

The partnership will target alternative asset managers that invest in the mid-market across asset classes, including private credit, private equity, real estate and infrastructure.

US mid-market forges ahead
A sample of mid-market companies posted strong year-on-year earnings and revenue growth, according to a report from New York-based Golub Capital.

The firm said the 50 firms in its Golub Capital Altman Index reported increases of 9.5 percent in earnings and 9.3 percent in revenue in the first two months of 2019. The GCAI is produced with Edward Altman, a credit expert at New York University. Though the businesses included change slightly each quarter, they are in the technology, healthcare, industrial and consumer sectors.

The report’s results show a strong quarter for growth, though there was a slight decline from the year-on-year earnings growth of 13.4 percent and revenue growth of 10.6 percent reported from October to November.