[Edaily Marketin, Reporter YunJi Kim ] The global private equity (PE) industry is attracting funds from insurance companies to alleviate liquidity pressures caused by delayed exits. As the sluggish mergers and acquisitions (M&A) market has delayed the sale of portfolio companies, causing disruptions in returning capital to investors, there has been an increase in fundraising using fund assets. In this process, a structure that divides risk into senior and junior tranches and sells them to institutional investors, such as insurance companies, is rapidly gaining traction.

According to industry sources on the 27th, global private equity (PE) firms are actively pursuing strategies to attract capital from insurance companies by leveraging fund assets. As delays in the sale of portfolio companies have made it difficult to recoup investments through conventional methods alone, they are turning to raising capital by utilizing fund assets that have not yet been disposed of.

A prime example of this is the CFO (Collateralized Fund Obligation). A CFO bundles equity stakes from multiple PE funds to issue bonds using these as underlying assets, then divides the resulting cash flows into senior and subordinated tranches based on risk level and sells them to investors. By attracting insurance companies to the senior tranche—which carries a relatively lower risk of loss—and investors seeking higher returns to the subordinated tranche, this structure enables fundraising tailored to each investor’s risk appetite.

Given this ability to attract capital tailored to individual investors’ risk preferences, CFO issuance is growing rapidly. According to the credit rating agency Kroll Bond Rating Agency (KBRA), the volume of CFO issuance based on secondary funds has increased more than 16-fold in four years, rising from just over $400 million in 2021 to $6.5 billion in 2025.

In fact, major asset managers are actively utilizing CFOs as a new means of fundraising. Last June, Blackstone considered issuing a CFO by bundling over $2 billion in buyout fund stakes held by its subsidiary, Strategic Partners. The plan is to structure these fund stakes as bonds—rather than selling them directly—to attract capital from new investors, such as insurance companies.

Franklin Templeton completed an actual issuance in August. It raised $1.5 billion through its first CFO by bundling private equity secondary and continuation strategies managed by its subsidiary, Lexington Partners, with U.S. middle-market loan assets held by Benefit Street Partners (BSP). Franklin Templeton notes that demand for structured private market products is growing among insurance companies and family offices.

Asset managers are also attracting new capital from insurers and other sources through NAV loans. A NAV loan is a method of borrowing funds based on the net asset value of various assets held by a fund; historically, it was primarily used to raise cash for distributions to investors or to secure additional investment capital. Recently, there has been an increase in structures that divide NAV loans into senior and subordinated tranches to attract different types of investors.

Under this structure, insurance companies provide capital for the relatively low-risk senior tranche, while private equity funds seeking higher returns participate in the junior tranche. From the asset manager’s perspective, this approach offers the advantage of raising capital from a more diverse pool of investors based on the same fund assets.

However, a growing concern is that as this type of financing becomes more prevalent, leverage can accumulate across multiple tiers. This is because the portfolio companies of private equity (PE) funds—which serve as the basis for CFO and NAV loans—often already carry acquisition debt; adding fund-level loans and structured bonds on top of this can further complicate the overall debt structure. Some market observers also point out that it may become difficult to ascertain exactly where and to what extent the actual risk is concentrated.

The FT reported, “While CFO and NAV loans can help lower financing costs for secondary funds and return capital to investors,” it also noted that “concerns about further leverage expansion are growing, given that there is already significant debt in the underlying assets.”