Data & Research May 2, 2023

PGIM Takes Majority Stake in Direct Lender to Boost Alternative Offerings

The firm’s investment in Deerpath Capital Management comes as institutional and private investors look to alternatives for returns amid volatile markets.

Reported by

PGIM Inc. announced Tuesday the acquisition of a majority interest in Deerpath Capital Management LP and its associated affiliates.  

The partnership will enhance PGIM’s existing global investment alternatives offering through the partnership, the Newark, New Jersey-based firm announced. The firm currently has $237 billion in assets under management in strategies across real estate, private credit and other alternatives.  

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

“This partnership with Deerpath Capital reflects our ambition to further grow our alternatives platform,” said David Hunt, PGIM’s president and CEO, in a statement. “It complements PGIM Private Capital’s existing direct lending capabilities by adding expertise in the lower middle market-sponsored space, further enhancing the direct origination platform of PGIM Private Capital’s core middle market-focused direct lending platform.” 

A U.S. private credit and direct lending manager, New York-based Deerpath Capital focuses on the lower middle market for financing private equity sponsor-backed companies. Deerpath Capital co-founders James Kirby and Tas Hasan will continue as CEO and COO, respectively, managing the business, which currently has more than $5 billion in assets under management. 

“PGIM Private Capital has been a global leader in debt investing for more than 50 years and is an ideal strategic partner for Deerpath,” said Kirby in a statement. “Their deep understanding of the asset management business, global footprint and distribution network will help Deerpath grow our direct lending platform, while allowing us to preserve our investment and operational independence.”  

According to April research from PGIM’s retirement solutions division, DC Solutions, alternative investments are still not commonplace in 401(k) plans or within target-date funds popular with retirement savers. However, findings suggest a small increase in usage and interest between 2020 and 2022. 

In 2022, more DC plan sponsors reported offering alternative investment options on their 401(k) menu. In 2022, 21% of plan sponsors said they provided at least one option, compared with 9% in 2020. In TDFs last year, just 6% of plans used private credit or private real estate debt, while 9% of plans sponsors said they included private real estate equity. 

Obstacles to offering alternative investments include participant education, operational challenges and cost, which remained the top three hurdles in both 2020 and 2022. Between those two years, litigation risk saw the largest uptick of any obstacle, from 27% to 48%.  

“Litigation risk is real, but it is a plan sponsor risk, not a participant risk,” the study stated. “One driver of the trend towards simplified DC investments has been the perceived reduction in litigation risk; however, in 2022, we saw a spate of lawsuits against large plan sponsors who hired an all-passive target date manager. As fiduciaries, plan sponsors are required to do what is in the best interest of participants.”  

PGIM’s report suggested that to truly support participants’ retirement outcomes, DC plan sponsors take an “institutional approach” like their defined benefit counterparts, which have a track record of including alternative investments such as real estate. DC plan sponsors can adopt a mix of active and passive management, broad asset class diversification and selective use of alternative investments. 

Products May 2, 2023

LIMRA: Annuities Break Another Record in Q1, on Track for Record ’23

New PGIM research also signals a potentially larger market for the guaranteed income product.

Reported by



Retail annuities just keep selling amid rising interest rates, according to the latest update from industry association LIMRA on Tuesday.

After a record-breaking 2022, first-quarter sales of the insurance investment product were up 47% compared to last year at this time, hitting $93 billion, according to the Windsor, Connecticut-based association. That marks the highest quarterly sales of annuities since LIMRA began recording in 2008, and the group expects the surge to continue for another record-setting year in 2023, according to Todd Giesing, assistant vice president of LIMRA Annuity Research.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

“Market conditions continue to drive investor demand for annuities,” Geising said in a statement with the report. “Every major fixed annuity product line experienced at least double-digit, year-over-year growth. … Despite expectations that interest rates will level off, LIMRA is forecasting total annuity sales in 2023 to exceed $300 billion for the second consecutive year.”

A boost in interest rate levels not seen in more than a decade, combined with market volatility, has driven investors to annuities in the past year and a half. The need for insurance-backed income options also comes at a time when the Baby Boomer generation is either in or near retirement, pushing the country’s population of those 65 or older to almost double over a 42-year span, from 52 million in 2018 to an estimated 95 million in 2060—or from 16% of the population to 23%, according to the U.S. Census Bureau.

Slow Uptake in Retirement Plans

Despite the boom in retail annuities, the guaranteed income product has been slow to gain traction in defined contribution retirement plans. It hasn’t been for lack of industry attempts, withproduct innovation including offering annuities through managed accounts and making them default options within target-date funds. Momentum for use in plans may be building, though, as more plan sponsors are considering the option, according to research from investment manager PGIM Inc. published Monday.

The Newark, New Jersey-based firm reported that 34% of plan sponsors are considering offering in-plan annuities, and 5% already offer them. Meanwhile, 24% of plan sponsors are considering offering out-of-plan annuity options to participants, and 6% already offer the option. Even if plan sponsors are interested, however, participant communication will be key if uptake is going to increase, PGIM wrote.

“Despite plan sponsors indicating that annuities (in and out of plan) are the top areas of interest, only 14% agreed there is a significant amount of participant interest in adding in-plan annuities,” the researchers wrote. “This suggests that a critical step for every plan sponsor will be to gain a more holistic understanding of their participants’ retirement income needs as they chip away at the retirement income challenge.”

In a report in February, LIMRA published a prediction that the in-plan annuity market would grow “exponentially” in the next two years, particularly among larger plans. The association cited national retirement policy’s removal of barriers to in-plan annuity options as a boon to the products but noted that continued education for advisers, plan sponsors and employees will be necessary for success.

Moving the Finish Line

For now, annuities are doing well, historically, with limited retirement plan uptake. Fixed-rate deferred annuity sales in Q1 hit $41 billion, up 157% from Q1 2022, according to LIMRA’s Tuesday report. Fixed-indexed annuity sales also had a record-breaking quarter, up 42% to $23.1 billion, and the income annuity market hit its highest quarterly sales ever, topping $4.1 billion.

Single-premium immediate annuity sales were $3.3 billion in the first quarter, 120% higher than prior year, and deferred-income annuity sales jumped 125% year-over-year to $820 million, according to LIMRA.

“With investors looking to lock in favorable payout rates before they begin to fall, LIMRA expects the strong sales in the first half of the year to drive income annuity sales to grow at least 15% in 2023,” LIMRA wrote in the report, based on industry estimates representing about 83% of the total market.

PGIM’s separate research, which reported more broadly on retirement income thoughts by plan sponsors, noted that annuities are not the only answer to retirement income needs.

“Keep in mind that there are many solutions and tools outside of guaranteed income that plan sponsors should offer participants, including investment solutions that address the risks retirees face in retirement, comprehensive investment advice, and dynamic withdrawal guidance, to name a few,” the researchers wrote.

PGIM’s research included 155 plan sponsors surveyed from May 23 to August 26, 2022, with at least one 401(k) plan and at least $100 million in 401(k) assets.

«