Mike Chappell: My role centres on the private markets, and, from that perspective, we’ve seen a lot of growth, especially in terms of assets that are positive from an ESG perspective.
We’re keen to see this trend continue as we feel it has contributed to the social fabric of the UK.
Other reasons to invest in the private markets are as follows:
"On the real estate side, we are expanding into longer tenor assets to
complement long term infrastructure."
Mike: Both in terms of asset classes and geography, we historically tended to invest in the UK because the assets and opportunities were there. We're seeing a lot of opportunities in mainland Europe at the moment. Within the assets that we’ve originated in 2023 here c.50% are domiciled in Europe – so we’re really seeing a geographical shift.
In terms of new assets, the duration angle is key. We’re looking into assets that give us the duration to match the liabilities we’re acquiring.
On the real estate side, for example, we are expanding into longer tenor assets via commercial ground rents, credit tenant leases, to complement long term infrastructure.
Mike: From the perspective of private markets, the LDI crisis was an interesting time for insurance institutions. Liquidity, especially, was an issue for a lot of institutions. Our team did very well and came together internally to work on our liquidity book, and we didn't have any problems.
"The assets we own will be held through at least one or two recessions."
That short-term liquidity issue did cause a blip in terms of institutional players making sure that they had enough firepower to pay any liability. To me, this was a short-term issue. Did it make any sort of significant difference? I don’t think so.
I say that because we're buying assets not as a trading book, but as private assets, and we have a buy-and-maintain portfolio – so, we buy it, we live with it, we look after it, and it sits with us for 20 to 40 years. Given what markets are like, the assets we own will be held through at least one or two recessions, or we'll have a number of other significant market movements such as the current situation with the Russian invasion of Ukraine. When these events happen, we’ve seen that private market portfolios tend to stay reasonably robust. Taking a long-time horizon allows you to flatten the volatility.
