Wall Street titans are betting big on insurers. What could go wrong?

Blackstone listed on the New York Stock Exchange during the summer of 2007. Doing so just before the global financial crisis was hardly auspicious, and come early 2009 the firm’s shares had lost almost 90% of their value. By the time the two other members of America’s private-markets troika rang the bell, Wall Street had been battered. KKR listed on July 15th 2010, the same day Congress passed the Dodd-Frank Act, overhauling bank regulation. Apollo followed eight months later. Each firm told investors a similar story: private equity, the business of buying companies with debt, was their speciality.

Yet as the economy recovered, private-markets firms flourished—emerging as the new kings of Wall Street. The biggest put more and more money into credit, infrastructure and property. By 2022 total assets under management had reached $12trn. Those at Apollo, Blackstone and KKR have risen from $420bn to $2.2trn over the past decade. Thanks to the firms’ diversification, their shares rose by 67% on average during 2023, even as higher interest rates caused buy-outs to grind to a halt. Private equity has plenty of critics, but the model of raising and investing funds—whether to buy companies or lend to them—seldom worries regulators. If things go wrong, losses are shouldered by a fund’s institutional investors and humiliated fund managers struggle to raise money again. There is little threat to financial stability.