Brookfield’s Insurer Trims Private Credit, Citing Crowded Trade

Brookfield Corp.’s insurance unit has pulled back from investments in private credit as surging demand from rival bidders pushes yields down.

Brookfield Wealth Solutions started to reduce its allocation to private credit six months ago, and is almost no longer investing in the asset class now, Chief Executive Officer Sachin Shah said at the Global Insurance Summit hosted by the Financial Times Wednesday in London. Demand has compressed yields, even as the underlying credit risk is the same and the covenants that protect creditors have become weaker.

“If everyone including all the newspapers talk about an asset class, it’s likely overbid,” Shah said. “The history of investing is littered with people who plow into things because it’s the flavor of the day.”

Shah’s comments stand in sharp contrast with the views of his peers, who increasingly are looking for new opportunities in the space — even if getting more yield means investing in more complex, niche products.

US insurers have been tapping the fast-growing market for private credit because the higher-yielding, long-dated investments match the retirement products they offer to clients. The asset class made up a third of the $6 trillion of assets on the balance sheets of US insurers at the end of 2024, according to a study by Moody’s Ratings.

Demand is also rising because private assets are showing up in more products aimed at individual investors and their retirement accounts. Moody’s cautioned in a report earlier this month that the rush of retail capital into private credit “could compress credit spreads and encourage riskier lending behavior” as demand outstrips the supply of suitable assets.

“I’m not suggesting people will lose money,” Shah said. “The decision you have to make as a business owner is, ‘Do you wanna do what everybody’s doing or do you wanna pivot?'”

Photograph: Wall Street; photo credit: John Taggart/Bloomberg

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