Apollo Global Management Inc.'s recent announcement that it would merge with insurance company Athene Holdings Ltd. is just the latest example in a flurry of the mergers, acquisitions and strategic relationships struck between alternative investment firms and insurance companies.
Money managers say the moves produce a perfect match, adding a big influx of permanent capital to their assets under management. The combinations also provide new, major clients that are part of an estimated $23 trillion insurance industry, helping managers to diversify their limited partner base and, in some cases, seed new funds as well as existing strategies.
Marc Rowan, New York-based co-founder and senior managing director at Apollo, said during an investor call after the deal was announced that the merger will enhance the $455.5 billion manager's ability to generate excess returns across the risk-reward spectrum — "something that is very difficult to find in today's marketplace" for all of its investors, not just Athene.
And for insurers, they get access to private assets that carry the promise of higher returns.
There is "truly a structural change in the industry between insurance players and asset managers" that has been evolving over the last three years, said Elena Lieskovska, partner and head of insurance worldwide for private equity firm Varde Partners LP.
While these combinations can provide existing limited partners with access to new investment strategies, they can also raise conflict-of-interest issues, industry insiders say.