This article was produced by L&G – Asset Management, America as part of their valued industry partnership with Insurance Investor.
Insurers have long used both public and private credit to support income generation, liability matching and portfolio diversification. However, as it appears that issuers today are increasingly moving more fluidly across financing channels, we believe insurers can no longer view public and private credit as competing allocations. In our view, this evolving landscape reinforces the value of an integrated public-private approach for insurers too.
Over the past several decades, the opportunity set available to investors has shifted meaningfully. The number of publicly listed US companies has fallen by roughly half since the late 1990s – from approximately 8,000 to fewer than 4,000 today. Many companies are choosing to remain private for longer, enabling a greater share of growth and value creation to occur outside of public markets.
This evolution has contributed to the rapid expansion of private markets. Today, there are more than 1,200 private companies globally with valuations exceeding $1 billion, dozens of private companies now valued above $10 billion and several exceeding $100 billion valuations.
As the public market universe has contracted and private markets have expanded, the distinction between the two is becoming less about company quality or scale and more about where companies choose to raise capital at different stages of their evolution.
For issuers today, the optimal financing channel depends on which market offers the best combination of execution, tenor, pricing, flexibility and investor demand. As a result, financing activity is spreading across registered bonds, Rule 144A markets, traditional 4(a)(2) private placements, bank debt, direct lending and asset-backed structures.
Borrowers are treating these markets as a continuum of financing options, moving between channels based on market conditions, asset type, maturity needs, covenant flexibility and investor demand.
As we see issuers move more fluidly across financing channels, insurers can benefit from treating public and private credit as complementary tools within a unified credit platform rather than viewing them as competing allocations. Public markets can provide liquidity, price discovery and tactical flexibility, while private markets can offer incremental spread, stronger lender protections and enhanced downside mitigation through covenant structures.
The most effective way to access an integrated approach is often to partner with a manager that has long-standing capabilities in both public and private credit. Managers with capabilities spanning both public and private markets may be better positioned to evaluate relative value, maintain issuer relationships and access the broadest opportunity set on behalf of policyholders.
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