(Bloomberg) — The man tasked with shepherding Aflac Inc.'s $110 billion portfolio is ready to make a wager on private equity to generate more income for the insurer.
The firm plans to bet on alternatives including private equity later this year, according to Chief Investment Officer Eric Kirsch. That follows a move last month to invest in real estate undergoing change such as renovations or upgrades, and aligns with Kirsch's goal to have at least 2.5% of the insurer's cash invested in growth assets, such as public equities, private equity and real estate.
"We are going to initiate growth assets, alternatives, second part of this year, but focused on private equity and real estate, not hedge funds," Kirsch said Monday in an interview at Bloomberg News headquarters in New York. "We also initiated a transitional real estate strategy in April," with an allocation of $500 million.
Other insurers including MetLife Inc. and American International Group Inc. have long bet on private equity even as they scaled back hedge fund investments. Aflac Chief Financial Officer Fred Crawford said the company doesn't need to be a leader in pursuing riskier investments, and prefers to stick with bets that have traditionally panned out well for insurers. While Kirsch considered a hedge fund bet, he said the timing didn't make sense.
"We'll continue to look at hedge funds," he said. "Three years from now, we'll reassess. We'll look at where the market is, because I think it's going through a transformation."
Kirsch has been diversifying Aflac's portfolio since joining from Goldman Sachs Group Inc. in 2011. Aflac bet on infrastructure debt last year, and Kirsch said the company was looking in the U.S. and Europe, as well as Asia to a lesser extent.
U.S. President Donald Trump has said he would boost federal spending on infrastructure, and Kirsch said he was hopeful that might help the asset class.
