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Privately Placed Debt on Life Insurers’ Balance Sheets: Part 1—A Primer
Life insurers buy long-term assets to match their long-term liabilities and hence are among the largest investors in corporate bonds.1 Over the past decade, insurance companies have shifted their corporate bond investments toward privately placed bonds (private placements). A private placement is an unregistered security that is sold to a limited pool of investors, primarily institutional investors, such as investment banks, pension funds, and insurers. While privately placed bonds accounted for 13% of life insurers’ bond investments in 2004, they accounted for over 20% in 2022 (figure 1).
Newsletter
Privately Placed Debt on Life Insurers’ Balance Sheets: Part 2—Increasing Complexity
In this second part of our Chicago Fed Letter series on life insurers’ investments in private placements, we use novel data to assess the growing complexity and liquidity of these investments.1 We start by documenting that these investments have shifted toward issuers in financial and real estate sectors. We then show that this shift reflects more lending to asset managers, including private direct lending funds. One reason for this shift to financial issuers is that these private placements tend to be more complex and less liquid, resulting in higher yields. Lastly, we show that, while ...
Newsletter
Small Business Employment in the Pandemic Era and Beyond
In this article, we study the creation of small firms, with a focus on the post-March 2020 period (i.e., after the start of the global Covid-19 pandemic).1 We document the increase in new small firms, as well as the contributions of small firms to employment growth, during this period. Our analysis shows that, despite the increase in the number of small businesses, the share of employees working for small firms is considerably lower than in large businesses and is, in fact, declining.