By Jacob Adelman
Worries about private credit have shaken financial markets in recent months, following years of surging growth for the industry. A new Barron's analysis shows that even the sleepy annuity and life insurance sector might not be safe from those concerns.
Insurers led by Athene and MassMutual held nearly $16 billion in bonds against funds managed by Cliffwater, Blue Owl Capital, Blackstone, and others hit with over-the-limit redemption requests so far this year, Barron's found.
Recent outflows of capital from these private-credit funds could make those loans' riskier than once thought, adding a new layer of uncertainty for policyholders expecting life or annuity payouts.
An Athene spokesperson said its holdings of such bonds, which represent less than 2% of its total portfolio, "have performed well over time and generated strong risk-adjusted returns, reflecting our ability to invest with discipline across asset classes and sectors."
MassMutual declined to comment.
Last month, Moody's downgraded its industrywide outlook for business-development companies, a sector that includes most of the private-credit funds, to negative from stable, citing the redemption requests by retail investors as a major factor.
The rating firm separately downgraded its outlook for Blue Owl Credit Income, the recipient of $1.9 billion in lending by insurers, to negative. S&P Global Ratings dropped its outlook from stable to negative for Cliffwater Corporate Lending, which has borrowed almost $6 billion from insurers, the most among funds hit with redemption requests beyond their quarterly limits.
Blue Owl said in an April 2 letter to shareholders that the redemption requests came from a small portion of shareholders and that its fund is "well positioned to navigate a more volatile market environment."
Cliffwater Chief Investment Officer Blake Nesbitt said on social media last month that its fund has outperformed its peers, while charging lower fees.
The asset managers did not reply to requests for comment from Barron's.
Nearly all insurer exposure to those funds is through loans, putting them ahead of the equity-holding retail investors if a vehicle fails.
Jillian Froment, executive vice president and general counsel for the American Council of Life Insurers, said life insurers invest for the long term, lining up those investments with the long-term promises they make to policyholders.
"Day-to-day market swings usually aren't a concern," she said. "And with nontraded BDCs, features like limits on withdrawals make it much less likely you'd see sudden run scenarios that could cause major disruption."
But if investors remain skittish about the funds and redemptions continue to outpace new fund-raising, the capital-starved vehicles could eventually threaten bondholders, as well, says veteran asset-management executive Mark Goldberg.
"There are second-order effects when liquidity demands exceed net inflow, and that ultimately could impact these loans," says Goldberg, who writes about private-credit funds on the website Alternative Investments Market Intelligence.
Insurers have been lenders to nine separate funds that were hit with the large redemption requests. The funds also includes vehicles managed by Morgan Stanley, BlackRock, Ares Management, MassMutual-owned Barings, and Apollo Global Management, Athene's parent, according to Barron's analysis of data provided by the National Association of Insurance Commissioners.
While loans to the nine funds accounted for a tiny fraction of any insurers' total assets, the exposure is the latest example of the insurance industry's growing appetite for investments beyond its traditional diet of corporate bonds and government debt, as they seek higher returns.
Insurance group Advantage Capital Management has faced regulatory action and a recent downgrade by the insurance industry's main ratings firm after missteps connected to loans supporting sports teams, budget airlines, and other assets with unpredictable returns.
Advantage Capital CEO Kenneth King said he was "happy to have this period of uncertainty behind us" after state insurance regulators ceased their actions. The company didn't respond to a request for comment about the downgrade from ratings firm AM Best.
Insurers have also been sued for transferring assets to affiliated businesses in overseas jurisdictions where they're allowed to carry thinner cash buffers.
The loans to private-credit firms are an example of an industry practice that could spook annuity policyholders expecting stable returns from their savings, says Eileen Appelbaum, co-director of the Center for Economic and Policy Research, a center-left think tank.
"They put it into an annuity that will be there for the rest of their lives no matter what," she says. "Now that steady stream of income they were counting on is being invested in risky things."
Assets of nontraded business development companies -- the dominant vehicle for selling private credit to retail investors -- have grown 145% over the past two years, expanding from about $114 billion at the end of 2023 to $280 billion, according to Fitch Ratings data covering 20 of the largest such funds.
Since early this year, these private-credit vehicles have come under fresh scrutiny, largely because of their loans to artificial-intelligence-threatened software firms as well as recently collapsed companies like First Brands and Tricolor. Those business failures led JPMorgan CEO Jamie Dimon to warn of more "cockroaches" in the system that could imperil private credit.
Even with most funds enforcing their stated quarterly limits on investor withdrawals -- known as "gating" -- many investors redeemed their holdings of nontraded BDCs faster than managers could sell new shares during the first quarter of 2026, Fitch wrote in a separate report.
Managers of these funds and some analysts say the funds remain on a strong footing, with institutional investors -- such as insurers -- remaining confident in the vehicles.
In a report last month, analysts with Morningstar DBRS said investors should "ignore the noise." The funds' overseers "manage significant institutional capital, which generally exhibits less volatile asset flows," the analysts wrote.
Apollo President Jim Zelter said during an appearance on Bloomberg TV that the public has "really lost the plot" on the private-credit funds.
"We're talking about a little bit of a skirmish on the sidelines here," he said.
Insurers are weeks away from having to report their first-quarter investment activity to state regulators, so it isn't known whether their exposure to the private-credit funds has changed during the redemption surge by retail investors.
Barron's asked each insurer whether they had changed their approach to private-credit lending in recent months. All either broadly declined to respond to questions from Barron's or said they don't comment on investment strategies.
The biggest lender among life insurers to funds that have faced over-limit redemption requests in 2025 was Athene, followed by MassMutual, American General, Security Benefit, and Commonwealth Annuity, according to Barron's analysis.
Athene's $4.8 billion in private-credit fund bondholdings are dominated by loans to private-equity firms that are rivals to its parent Apollo. Among insurers, Athene is the biggest lender to Blackstone Private Credit Fund, with nearly $1.3 billion in those bonds on its books.
Write to Jacob Adelman at jacob.adelman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 24, 2026 02:30 ET (06:30 GMT)
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