Optimizing Private Market Investment Solutions for Cross-Border InsuranceOptimizingPrivateMarketInvestmentSolutionsforCross-BorderInsurance

Overview

Attracted by strong income, diversification characteristics and a low loss history, a leading European re-insurance company was seeking an optimal solution to grow private market exposure to U.S. commercial real estate debt.

Key Partners

• European reinsurance company
• PGIM Real Estate sales and client service team
• PGIM Real Estate investment management team
• PGIM Real Estate’s U.S. Originations Network

Challenge

The reinsurer was searching for investment-grade mortgages as a source of non-traditional, diversified private fixed income to complement existing long-duration corporate credit and government bonds in its liability hedging portfolio without adding incremental credit risk.  

Additionally, the reinsurer was searching for a tax and operationally efficient vehicle that would provide quick deployment, broad diversification, and an element of liquidity to aid in rebalancing over time.

Approach

PGIM Real Estate’s extensive direct originations team, institutional investment management capability, and proprietary loan servicing platform provided reliable access to attractive private fixed income investments from across the United States.  A strong track record demonstrating minimal credit losses over 20 years further supported their confidence in the platform.

PGIM determined that a strategy with defined liquidity characteristics would offer the flexibility to more easily access and rebalance within this private asset class while also allowing “look through” to the underlying investment instruments for solvency capital purposes.

Solution

PGIM Real Estate offered the insurer the combination of asset-class expertise, sophisticated reporting and ALM capabilities to better optimize their strategic asset allocation. Together, PGIM Real Estate and the insurer identified a tactical opportunity that addressed the insurer's exposure and asset-class checklist and captured additional relative value via a pooled vehicle that offered scale and expense efficiencies.

The copportunity provided the reinsurer with a compelling route to:

• fast deployment
• immediate diversification
• liquidity in an otherwise illiquid asset class
• full benefits of relevant tax treaties while mitigating many of the state and local tax complications that face domestic and international investors in the United States

PGIM Real Estate:

• Partnered with the insurance company to identify appropriate solutions to build its portfolio
• Worked closely with the insurer to help it understand the asset class, including expected performance, sources of diversification and nature of the underlying collateral
• Collaborated with the investor to structure a dedicated vehicle for them and other similar investors in their region to efficiently invest in the space.
• Partnered to support the investor’s robust risk management frameworks that address both traditional and emerging risks
• Educated the asset manager on PGIM Real Estate’s investment and valuation processes, as well as deployment and liquidity expectations
• Adapted standard strategy reporting to incorporate specific needs of the client

 

^{Case studies are provided for illustrative purposes only and results may vary. Opinions and statements expressed herein are those of PGIM and not those of any fund, client or other investor with PGIM. The description of PGIM's advisory services herein does not constitute an endorsement or testimonial from any investor or other third-party and may not reflect the experience of other investors.}