Aflac Takes a Different Approach to GP Stakes — And It’s Not Buy and Hold

The insurer began acquiring stakes in asset managers in 2017. It has already sold off two of the five it bought.


Illustration by II

For Aflac Global Investments, buying GP stakes isn’t a long-term buy-and hold strategy.

Instead, the insurer, which manages $100 billion in general account assets, is using the practice of buying pieces of investment managers opportunistically. When the time is right to sell, the company will — and has already done so in two of the five GP stake investments it has made so far.

“Seven years ago, after we were outsourcing for a short period of time, we were able to tether one of our mandates in an equity manager ourselves,” said Brad Dyslin, global chief investment officer for the firm. “We stuck a toe in the water and we really liked this approach.”

Just last month, Aflac announced its fifth deal, acquiring a 40 percent interest in Tree Line Capital Partners, which manages $2.7 billion in assets. Tree Line specializes in direct lending in the lower middle market.

“We are at our core a credit shop,” Dyslin said. “They bring that same mindset.”

The GP staking business has grown in recent years, as investment managers look for ways to access liquidity, either to offer founders an opportunity to retire, opportunities to invest, or the ability to offer new executive team members ownership in the company. One recent example is outsourced chief investment officer firm Partners Capital’s sale of a minority stake to General Atlantic. The OCIO firm said that it wanted to provide liquidity to its first generation of founders.

Aflac is on the flip side of these deals, benefiting from sharing in the profits of funds. And this is not a buy-and-hold strategy for the firm.

According to Dyslin, Aflac has already sold its stakes in NXT Capital, its first GP stakes investment, and Varagon Partners.

With respect to NXT, Aflac had invested $50 million into the firm itself, which managed a $500 million portfolio on its behalf in 2017. But NXT was acquired by Orix Corporation USA, prompting Aflac to sell.

Varagon, which managed a $3 billion portfolio on Aflac’s behalf, also sold a minority stake to the firm in 2020. According to Dyslin, offloading the stake — not the fund investments — was an opportunistic trade for the firm. “We were approached by multiple people who were interested,” he said. “The portfolio has done well for us. We were content to continue to support the platform by leaving our mandate there, but we got attractive terms on the equity.”

For both, Dyslin highlighted the fact that Aflac remained invested in the funds. “We don’t have a set time frame,” he said. “We are not a private equity shop. We don’t own these in a fund. Our plan is to be very opportunistic.”