Morgan Stanley and AllianceBernstein Eye Growing Insurance OCIO Market
Outsourced Chief Investment Officer (OCIO) firms, including Morgan Stanley and AllianceBernstein, are increasingly targeting the insurance sector as carriers demonstrate a growing appetite for alternative investments, particularly private credit. This shift is driven by the need for higher yields in a low-interest-rate environment and a broader trend toward outsourcing investment management.
Increased Demand for Alternatives
Insurance companies are seeking to incorporate alternative strategies, such as absolute return hedge fund strategies with lower risk-return profiles, into their portfolios. Sona Menon, head of OCIO for Morgan Stanley Wealth Management, noted the increasing interest from insurance entities in outsourcing investment management. Morgan Stanley currently manages approximately $5 billion in insurance assets, a smaller segment of its overall $247 billion OCIO business.
Expansion Plans at Morgan Stanley
Menon plans to expand her team to cater to the growing demand from insurers, endowments, foundations, retirement plans and ultra-high net worth individuals. Morgan Stanley intends to hire talent specifically focused on the insurance space later in 2026. This move follows previous successes in managing portfolios for Hartford HealthCare ($4.3 billion) and Vanderbilt University Medical Center ($1.1 billion) in 2022.
AllianceBernstein’s Strategic Push
AllianceBernstein is also actively expanding its presence in the insurance market. The firm, with $870 billion in assets under management, hired Geoff Cornell as its first-ever insurance investment chief in 2024 to lead this effort. AllianceBernstein currently manages around $200 billion in insurance assets, with approximately half coming from its parent company, Equitable.
Growth in Outsourced Insurance AUM
Data from Clearwater indicates that outsourced assets under management (AUM) in the insurance sector reached approximately $4.5 trillion in 2024, up from $2.9 trillion in 2020. A BlackRock report reveals that 87% of respondents plan to change their asset management operating model, with 53% moving towards a hybrid model.
Challenges and Opportunities
Despite the growth potential, OCIOs face challenges in serving the insurance industry due to stringent regulatory requirements, capital considerations, and the need for specialized expertise. Joe Eppers, CIO for Selective Insurance, emphasized the complexities of managing insurance company portfolios, citing the need for expertise in capital, accounting, ALM, liquidity, and regulatory considerations. The insurance space is becoming increasingly competitive, with private equity firms and asset managers also entering the market.
Looking Ahead
The OCIO market for insurance companies is expected to continue growing as insurers increasingly seek to outsource investment management and navigate a complex investment landscape. Specialists will be required to navigate the intricacies of insurance company investing, which differ significantly from endowments and pensions.