RGA's Strategic Investment in PACT Capital: Diversifying Portfolio and Tapping Middle-Market Opportunities

Reinsurance Group of America (RGA), a leading global life and health reinsurer, has announced a strategic investment in PACT Capital LLC, an independent investment firm specializing in middle-market alternative asset managers. Through a wholly-owned subsidiary, RGA has made both an investment and an anchor commitment to PACT, aligning with the reinsurer's strategy to enhance investment capabilities through specialized asset class exposure.

PACT Capital, headquartered in New York, aims to partner with high-performing private capital firms to support their strategic growth objectives. The firm will utilize its proprietary imPACT platform to assist established and emerging firms in accelerating capital formation, designing and launching new products, improving operations, attracting and retaining talent, leveraging cutting-edge technology, and improving outcomes for underlying portfolio companies.

Leslie Barbi, Executive Vice President and Chief Investment Officer of RGA, emphasized that this strategic investment in PACT demonstrates the company's commitment to forging collaborative relationships that drive shared value for all stakeholders. This partnership provides RGA with valuable exposure to a specialized asset class and exemplifies the type of opportunities and relationships RGA is actively pursuing to enhance its investment capabilities.

Christian von Schimmelmann, Managing Partner and Co-Founder of PACT, stated that the partnership with RGA, a recognized global reinsurance leader, validates PACT's differentiated investment approach and strategically positions the firm as a preferred capital solutions provider. With RGA's support, PACT will be able to accelerate its development and strengthen its market position, looking forward to a productive long-term partnership.

Goodwin Procter LLP served as legal advisor to RGA, and the financial terms of the transaction were not disclosed.



RGA's investment in PACT Capital aligns with its core investment values in several ways. First, it allows RGA to diversify its investment portfolio and gain exposure to the specialized asset class of middle-market alternative asset managers. Second, the strategic partnership aligns with RGA's long-term investment philosophy, focusing on creating sustainable long-term value. Third, the deal structure, combining both an equity investment and an anchor commitment, maximizes RGA's potential returns while providing PACT with both capital and credibility to attract other institutional investors. Lastly, the partnership aligns with RGA's risk management approach, aiming to optimize capital allocation and manage risks effectively.

PACT Capital offers RGA several strategic advantages in the middle-market alternative asset management space. The firm's expertise and experience, led by Christian von Schimmelmann and Brian Vickery, enable it to provide valuable insights and strategic support to middle-market alternative asset managers. PACT's proprietary imPACT platform can help RGA's partner firms optimize their performance, potentially leading to higher returns on RGA's investments. Additionally, PACT's focus on the middle-market segment creates a powerful value proposition for RGA, as this segment often offers better risk-adjusted returns due to less competition compared to large-cap markets.

RGA's anchor commitment to PACT Capital balances risk and potential returns by providing both capital and credibility to the firm, while also securing priority access to its best investment opportunities. The deal structure, combining both an equity investment and an anchor commitment, suggests a deep strategic alignment between the two firms. This balance of risk and potential returns can be further analyzed by considering the following points:

1. Diversification and higher yields: By investing in PACT Capital, RGA gains direct access to middle-market private capital opportunities, which often offer better risk-adjusted returns due to less competition compared to large-cap markets. This diversification allows RGA to potentially achieve higher yields than traditional investments.
2. Performance-based elements and governance rights: The undisclosed terms of the deal likely include performance-based elements and governance rights, which help RGA participate in private markets fee economics while maintaining exposure to underlying investment opportunities. This structure allows RGA to benefit from both investment returns and the economics of asset management, creating multiple revenue streams from a single strategic relationship.
3. Strategic alignment and validation: RGA's investment in PACT Capital aligns with its strategy to enhance investment capabilities through specialized asset class exposure. The partnership validates PACT's investment approach and positions the firm as a preferred capital solutions provider, further reducing RGA's risk.
4. Market positioning and timing: The deal comes at a time when middle-market alternative asset management is experiencing substantial growth, driven by institutional investors seeking yield in a competitive market. PACT's focus on this segment, backed by RGA's capital and reputation, creates a powerful value proposition that balances risk and potential returns.

In conclusion, RGA's strategic investment in PACT Capital aligns with its core investment values, offering the reinsurer several strategic advantages in the middle-market alternative asset management space. The deal structure balances risk and potential returns by providing both capital and credibility, securing priority access to investment opportunities, and aligning with RGA's strategic objectives. The market timing and strategic alignment contribute to a balanced risk-reward profile for RGA.