29 November 2012Asset management analysis

BlackRock targets infrastructure investments

BlackRock plans to launch a new investment unit that will specialise in structuring investment opportunities that would allow insurers and captives to invest in infrastructure debt.

The new unit will be headed up by Phillippe Benaroya, Chris Wrenn and Giles Lengaigne. The team will target companies seeking alternative sources of income and open to investing in alternative asset classes. These will include infrastructure debt in a variety of sectors, including transportation, social infrastructure and regulated utilities.

BlackRock believes infrastructure debt investments will prove attractive to insurers—including captives—because they offer a cash yield, attractive liquidity premium and low correlation to other asset classes. The asset manager said the move comes in the context of the current low interest environment and reflects a desire in the insurance industry to seek better yields.
“This new platform is the right service at the right time,” said David Lomas, global head of BlackRock’s global financial institutions group. “Solvency II is proving a major catalyst for insurers in this new world of market volatility and low interest rates as they search for alternative sources of income to meet their liabilities.

“Research undertaken by BlackRock earlier this year suggests insurers may look to increase their allocation towards alternative asset classes and to achieve this, the characteristics of infrastructure debt make it an ideal strategy to help them in this search for diversified income.”

BlackRock’s announcement comes less than a week after European Insurance and Occupational Pension Authority (EIOPA) chairman Gabriel Bernardino warned the European insurance community against investing in non-traditional asset classes.