We need to say this again and again. The money that insurers swap in return for promises to pay annuities (replicating pensions) is invested by those insurers for profit.
But as Mary McDougall and Alexandra Heal explain here, the investment of money in the private markets does not always make for profit and what if it led to trouble for these insurers?
They’re talking here about investment in private equity but the story in private credit has been even worse. OTPP, La Caisse and Omers are massive DB plans and not insurers buying out UK DB insurers, but read on…
A number of Canada’s biggest investors lost money on their private equity holdings last year as a downturn in the buyout sector continued to weigh on returns at some of the world’s largest retirement funds.
And does this sound familiar
OTPP’s PE portfolio dropped in value from C$60.4bn to C$50.8bn last year, partly driven by full or partial sales of its investments in insurance brokerage BroadStreet Partners
Sounds familiar?
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Investment in the insurance buy-out market has been bad news for these Canadian Pension Schemes, but investing in listed markets has been better news
Overall returns across the pension companies were boosted by buoyant stock markets last year. OTPP’s total portfolio net return was 6.7 per cent, compared with 6 per cent for Omers and 9.3 per cent for La Caisse.
An increasing number of once British insurance companies are now owned by American and Canadian private finance companies investing the money that once backed our pensions into American private credit.
“Buy-out” in the American insurance market has not been good for Canadian pension funds and I fear it won’t be much good for UK pension schemes and pensioners too.
The not so diverse management team of aforementioned Broadstreet Partners
