China Life Insurance (Overseas) plans to invest $250 million into US-headquartered TPG, part of the sector’s cautious push into overseas private equity, according to people familiar with the matter.
The Beijing-based insurer will make the investment into TPG’s general partnership, boosting the firm’s pot of permanent capital, the people said. China Life joins Singapore’s GIC and the Kuwait Investment Authority, which bought into TPG’s general partnership in 2011.
Private equity firms are keen to tap the huge pool of wealth accumulating at Chinese insurers as the country’s growing middle class looks to protect its lifestyle. State-owned China Life is one of China’s largest insurers and ranked 98th in the Fortune Global 500 list, up 13 places on last year.
Elsewhere for example China Reinsurance Group invested $30 million into one of KKR’s funds.
Meanwhile, Chinese insurers are looking to diversify their portfolios as the cautious Chinese industry regulator gradually loosens control. They are also looking for outsize returns to cope with the growing burden of a rapidly aging population.
In 2010 the China Insurance Regulatory Commission (CIRC) allowed investments into private equity and in in October 2012 into overseas PE firms. In February the CIRC eased restrictions further and upped to 30% the ceiling on Chinese insurers’ investment into private equity and publically traded companies. Previously insurers could invest up to 10% of their portfolios in private equity.
However Chinese insurers’ move offshore has been slow as they gain experience and overcome communication and cultural difficulties. Also CIRC is very particular about the overseas private equity funds it allows insurers to pick.
Chinese institutions' overseas investment has also been hindered by high return expectations given the swift pace of domestic economic growth onshore; short-term investment horizons; and they have been burnt before.
China’s sovereign wealth fund CIC invested $3 billion into Blackstone just ahead of the firm’s listing, only to see the value of its investment fall sharply post IPO.