Retailisation of Private Assets: Why Life Insurance is an Ideal Vehicle

A Long Investment Horizon Compatible with Private Assets

One of the major advantages of life insurance is its long investment horizon. This type of investment supports policyholders throughout their lives: preparing for retirement, transferring wealth, financing children’s education or acquiring Real Estate – it is not a vehicle that accumulates cash for immediate use.

This time perspective is particularly aligned with private assets, whether Private Equity, Private Debt or infrastructure. Indeed, it is over time that the benefits of these investments are realised and that they can fully express their return potential. This is why life insurance is an ideal vehicle to support the real economy. It represents a significant volume of savings with a converging long-term maturity.

Diversification and Risk Management

For this, diversification is a fundamental principle. The famous adage “don’t put all your eggs in one basket” takes on its full meaning here.
Life insurance contracts offer this extraordinary capacity, particularly in France through so-called multi-asset contracts in which you can find:

• euro-denominated funds, managed by the insurer and guaranteeing capital security,

• collective investment funds (UCITS), offering diversified exposure in terms of management styles, geographical areas, business sectors and strategies,

• real assets, which constitute a third diversification lever.

Private assets also represent a diversification tool in which the client will be able to invest part of their savings. Indeed, real assets are relatively uncorrelated to the listed market and therefore a diversified Private Equity fund will not lose 10% overnight in the event of a drop in the stock markets. On the contrary, this Private Equity fund having a long time to develop, will have a fairly clear decorrelation to the market side. By decorrelation, we should understand that as there is less volatility, there will be fewer sharp upturns and downturns in the client’s wealth. It is a kind of shock absorber for financial market volatility.

Giving Meaning to Customers' Savings

The final advantage of real assets is their ability to give meaning to the savings of clients who invest in this type of asset. Today, more and more savers want their money to contribute to concrete projects that are useful to society. Private assets finance the real and local economy (SME and ISE development, energy infrastructure, etc.)
As an example, at Generali, we have developed funds exclusively dedicated to our clients’ unit-linked insurance policies. These are funds that finance, for example:

• sustainable infrastructure that invests in the renovation of water reprocessing plants,

• the implementation of an urban heating system,

• financing an electric locomotive fleet to boost freight transport by rail in Europe and thus reduce the weight of trucks transporting freight in Europe,

• wind farms, fibre to supply digital technology to parts of France where it is lacking.

This type of investment allows not only an attractive return, but also increased transparency on the impact of investments. Unlike investments in listed markets, where savers receive mostly abstract macroeconomic analyses, real assets tell a story: investors can regularly monitor the concrete progress of the projects they support.
This is a topic that was not very much on people’s minds 10 years ago, but in the face of climate change, and notably COP21, the social responsibility of investors has become a central topic. This has made consumers, and therefore savers, aware of the need to support the model and accelerate the transition. Today, many savers want to square financial performance and positive impact on the ecological and social transition.
In summary, life insurance is proving to be a vehicle perfectly suited to integrating private assets for several reasons:

1. a long investment period, in line with the time needed for private assets to generate value,

2. controlled diversification, to reduce volatility and better control risk,

3. an investment with meaning, aligned with savers’ expectations regarding economic and environmental impact.

Today, with the possibility of including these assets in life insurance schemes, investors can combine performance, resilience and societal commitment. This development marks a new stage in the democratisation of responsible finance and in the optimisation of long-term investments.

*France insurers.

Rémi Cuinat, Head of Unit-Linked Assets, Generali France