Gilles Dellaert is the global head of Blackstone Credit and Insurance (BXCI), which was created to bring together Blackstone’s corporate credit, asset-based finance, and insurance groups. BXCI now manages more than $350 billion in assets, accounting for the bulk of Blackstone’s total credit assets and a substantial part of the firm’s $1 trillion-plus of assets under management (AUM). McKinsey’s Andrew Reich, Ari Libarikian, and David Schoeman sat down with Dellaert at Blackstone’s offices in New York. The following is an edited version of their conversation.
McKinsey: Please tell us about your background.
Gilles Dellaert: Going all the way back, I was born and raised in Belgium, went to college there, and started my career at a local bank. I then joined J.P. Morgan in Brussels before moving to its New York office. I left to follow my boss to Goldman Sachs, working in credit trading within the securities division. I moved to the reinsurance group in 2006, eventually becoming CIO of the business while it was still small. We grew steadily, and the business was spun off in 2013.
It took on a new name, Global Atlantic, and we expanded through acquisitions, reinsurance, and organic retail growth. We continued to grow and in my final few years there, I was fortunate to become co-president.
In 2019, Blackstone reached out to talk about their insurance business, and the more time I spent with members of the firm, like Jon Gray, president and COO, and Steve Schwarzman, cofounder and CEO, the more it became clear that our visions for what that business could become at a firm like Blackstone were completely aligned. My first day was April 1, 2020.
McKinsey: A difficult time to start a job.
Gilles Dellaert: It was five days after we shut the office. I joined by Zoom from my kitchen table.
Blackstone’s approach
McKinsey: What was the thesis behind Blackstone bringing its credit and insurance businesses together?
Gilles Dellaert: About a year and a half ago, we recognized that we were doing credit lending in several different business units. And while that was all well-intentioned, it’s not how you would draw it up from scratch. When our investing customers came in and said, “We want access to your best ideas,” we’d have to marshal resources from a number of groups. And similarly, when a borrower or a bank came to us with a loan pool or an asset that they wanted to finance, they wouldn’t always know who to call.
By bringing it all together, we thought we could improve the experience and outcomes for everyone. We can be a one-stop-shop solutions provider to both our investing clients and our borrowing clients and say, “There’s nothing we can’t do for you.” We are in a unique position across many asset classes, sectors, and subsectors; there is little we can’t finance or be a solutions provider for.
By putting all our resources in one place, we also found that we make better, smarter, more informed decisions. We connect more dots.
McKinsey: Credit assets at Blackstone, including its real estate debt businesses, have grown to more than $430 billion over the past three years. Is the combination of groups the biggest factor in that growth? Are there other factors?
Gilles Dellaert: Bringing together BXCI certainly helped. But ultimately, everything we do at Blackstone starts and ends with investment performance. The firm is built on delivering for our clients. Steve Schwarzman likes to use the restaurant analogy: if we serve one bad meal, the customer might not come back. If we serve good meals, they might come back and try more things on the menu.
In our business, that means we’re trying to find asset classes or strategies that we think will offer differentiated returns for our customers. We like them to be scalable so that we can grow into them with our clients. And if we do a good job, they’ll grow with us. That’s exactly how it’s played out over the past few years with our open-architecture insurance model. We have grown to four strategic relationships and about 20 other insurance company clients, and now manage over $220 billion for these clients specifically in BXCI—without owning or becoming an insurance company and staying asset light.
Everything we offer today in credit across the spectrum—corporate, public and private, infrastructure, and asset-based finance—all of them started as one-off offerings. We built them patiently and purposefully. At Blackstone, we have the luxury of doing that on the back of established equity-investing businesses. To take two examples, making loans to infrastructure borrowers is a lot easier if you have relationships from a successful $53 billion infrastructure equity business, and making loans in real estate is a lot easier with a $600 billion global real estate portfolio. And vice versa, our strength in credit benefits the rest of the firm. Leveraging both sides of that ecosystem has been incredibly powerful.
McKinsey: How do you achieve differentiated investment performance? Your people have a lot to do with that, presumably.
Gilles Dellaert: One hundred percent. You can’t do what I just described if you don’t have A-plus people and a very repeatable and scalable process. We’re lucky to be able to attract those people from a variety of different institutions, backgrounds, and schools. Blackstone received over 50,000 applications for our first-year analyst class—153 positions. I think our talent level is second to none, and we are also very focused on having a culture with nice people who help reinforce the value of collaboration across BXCI and the firm. Beyond talent, we layer in rigorous processes, investment discipline, accountability, and team play, and that makes a big difference and leads to terrific results.
McKinsey: Let’s talk about BXCI’s strategy in insurance. You’re taking a capital-light approach, which is different from some of your notable competitors. Can you describe why Blackstone is taking this approach?
Gilles Dellaert: Our roots as a firm are in asset management. We have done that historically in a capital-light fashion, so when we put together the vision for our insurance business, we stuck with that approach, and it’s been fundamental to our growth. Our vision is an open-architecture model that we can offer to all our clients and say, “We want to listen to you; what are your needs? Here’s everything we do; you choose what is relevant for you, and we’ll show how we can add value for you.” We can serve many customers, as opposed to buying a company and assuming the insurance liabilities associated with that.
Blackstone’s consistent strength over nearly 40 years has been as a third-party asset manager for clients. And the same is true here—we’ve found our customers have appreciated the customized, scalable approach we offer. That’s our strategy, but it’s a large industry with room to grow for multiple approaches.
The state of the insurance industry
McKinsey: As your experience confirms, the financial crisis was a turning point for the insurance industry. Since then, we’ve had years of low interest rates, until recently, and insurance, particularly life, has been losing relevance for many customers. What’s the path that the industry has taken and where does it stand today?
Gilles Dellaert: The prolonged low-rate environment created tremendous challenges for the industry. Insurers were facing asset-liability-management challenges and earnings and return-on-equity [ROE] challenges that stemmed from duration issues in an era of lower rates.
Both things combined made insurers think hard about who they wanted to be, and we saw a transition away from asset-intensive businesses toward fee-generative ones. The industry was set on a path toward balance sheet optimization and stronger ROEs, and insurers also started to look to asset managers they could work with on private credit to improve their investment performance. Then in 2022, interest rates rose rapidly, which provided growth in annuity sales for the first time in a really long time; annuities are once again attractive and compelling to policyholders, which is another element in today’s market.
Enter private managers
McKinsey: You noted that private asset managers have become interested in insurance over the past decade. We estimate they’ve injected about $30 billion of net new capital into life and annuities globally in the past ten years. Further, about a trillion dollars of liabilities have been transferred to private capital-backed insurers, about 10 percent of the industry total. Where do you see this trend going in the near and long term? And what’s the end game; do you see some kind of equilibrium developing?
Gilles Dellaert: I think the trend will continue because traditional insurers still need to further rationalize their balance sheets. They still have large in-force blocks that, in this market environment, they can transact on. Maybe the pace of change won’t be as intense as the past few years, but I think the trend will continue. If you talk to many executives, they’ll tell you that having access to capital from reinsurance players aligned with or backed by alternative asset managers has been healthy because it’s given them an additional avenue to strengthen their balance sheets and capital structures, and ultimately strengthened the industry—which has benefited the entire financial ecosystem. It’s a tool that’s proven useful and has been widely adopted. It’s not just about reinsurance deals to free up capital; more insurers are also pursuing more direct asset management with companies like us to improve their financial positions.
McKinsey: What’s driving the shift?
Gilles Dellaert: It’s structural. Right now, around the world, there’s an aging generation that increasingly needs savings or retirement products that many insurers have not consistently provided. Demand for these products can be hard to predict, but the long-term trend is up, and insurers will need more capital to support that growth. If you want to be relevant today, it’s essential to have access to the yield enhancement that private credit offers, which allows you to offer consumers competitive products.
McKinsey: It’s clear that private capital is becoming more mainstream in the insurance industry, and the trend of allocating more to private credit is driving a gradual shift away from public fixed income.
Gilles Dellaert: That’s right. Investors today are still largely allocated to public fixed income. What’s happening now is investors are realizing that we have long-duration liabilities; we don’t need the day-to-day liquidity that public markets offer. Factor in the growing awareness that investors can get access to the same ratings and risk profiles as public debt but potentially earn 150 to 200 basis points of excess spread. And, increasingly, CIOs with liabilities that stretch out to 30 years are saying that makes a lot more sense than just buying public securities. If you poll industry CIOs, I think they will say they’re looking to increase allocations to private credit, not decrease them.
McKinsey: The ground is shifting. Five years ago, insurance CEOs were telling us, “We’ve been around for 100-plus years, and the reason we’re not going into private credit is because we want to be around for the next hundred years.” Now they’re saying, “We’ve been around for 100-plus years, and we are going into private credit because we want to be around for the next hundred years.”
Gilles Dellaert: It’s becoming table stakes.
What about banks?
McKinsey: Where is the interplay in lending between banks and private managers headed?
Gilles Dellaert: We think these relationships are very complementary and a positive for the entire ecosystem. We’re partnering with banks, including by buying loan pools from them and helping support their growth as a flow partner alongside us. We are finding lots of ways to work together as they pursue less asset-intensive balance sheets. We did a deal with Barclays on that basis in early 2024 and with Santander in late 2024. And as this trend plays out, I think it’s a great outcome for the financial system that loans can find a way directly onto the balance sheet of insurance companies, pension funds, and sovereign wealth funds with long-duration needs. These are sophisticated buy-and-hold investors, and they’re buying loans in unlevered form. They get compensated for that because they get closer to the asset. In our view, that ultimately derisks the financial system, and it’s a good thing for borrowers to have access to both banks and private lenders.
Here too, it is part of a broader structural shift happening as banks reprioritize some lending activities. For example, some will want to increase infrastructure lending and scale back in other areas; some will go further into consumer lending and likewise pull back on other credits. As they scale back on some products, they are increasingly coming to firms like ours to partner with them. They say, “We want to retain those customers, and we want balance sheet capacity to help us to continue to serve them. It’s a win–win for both parties and the strength of the system.”
Risks and echoes of the past
McKinsey: Still, some investors are wary of risks they don’t understand, and they’re concerned because the business is so new.
Gilles Dellaert: At a high level, we don’t think lending is risky. Look at our private investment-grade business—we’ve had nearly zero downgrades. As to the industry being untested, that’s a misconception. If you go way back, insurance companies used to be allocated to private credit, just in different forms. They used to buy and originate their own mortgage loans. That’s private credit, privately negotiated with a borrower. They used to be big allocators to private placements, which are private-credit investment-grade deals. They used to buy asset-backed products. They used to own things like equipment and finance platforms. The underlying investments are not new for the industry—insurers can now access them through third-party managers with solutions tailored to their needs.
Consumers and international growth
McKinsey: How do you see these changes affecting the retail consumer? Will there be different products? Will there be any change in pricing?
Gilles Dellaert: Primarily, it’s better pricing and outcomes for a customer who is looking for an annuity or savings product at a time when the demographic trend and need for retirement savings has continued to grow. Anybody who’s adopted these strategies has been able to offer more competitive rates in their annuity products and more competitive pricing on their long-duration life business. And that’s benefited the consumer, no question. That’s why these companies have been growing recently. That’s a good thing for retirees everywhere. Why shouldn’t they have access to the same benefits that large institutions have?
McKinsey: Let’s talk international expansion. Most of the activity in private credit and insurance has been in the United States. Europe and Asia seem like the next frontiers. Where do you see the biggest opportunities internationally, both within lending transfer to private markets and risk transfer from insurers?
Gilles Dellaert: Both Europe and Asia are highly relevant as next chapters in this evolution. It’s hard to handicap which one will grow faster, but I think it will be a steady, patient build-out. I don’t think you’re going to see massive partnerships announced anytime soon, but I think managers need to be on the ground in both regions in a meaningful way. Managers need to source assets that are of interest to the local players in their relevant currencies and in their relevant capital regimes where there are many differences across geographies.
Blackstone has been active in both regions for decades, and we’ve invested significantly to add talent across BXCI with a particular focus on asset origination and sourcing, in addition to bolstering the insurance team more broadly. To be relevant long term, you need to be relevant on both sides—lending and asset management—just as we are in the United States.
McKinsey: Are there particular markets in Europe or Asia that you feel will become prominent soon?
Gilles Dellaert: Australia, Japan, South Korea, and Taiwan are all sizable insurance markets, so naturally, they come to mind first. In Europe, it’s less about any one country and more about which products work under Solvency II,1 which tend to be longer-duration, tighter-spread products than those seen in the United Kingdom in pension-risk-transfer and bulk-purchase annuity deals. While the products will look different, the overlay for investors will be the same: to reduce public debt and add private debt that has the potential to yield more and do that in a lower-risk way.
Future directions for BXCI
McKinsey: As you continue to scale, what’s the role of AI, data, and digitization?
Gilles Dellaert: Data is core to everything we do. We have meaningful data science capabilities at Blackstone, and we’re investing further in them and in AI. Our clients increasingly want access to customized data reporting and analytics, for example, self-service tools that give them views of their portfolios, and the ability to model stress scenarios in nimble and easily customized ways. I think AI will definitely have an impact on the insurance industry, especially in the operationally intensive functions. But even for us, some deal teams, investment teams, and analysts are starting to use it in a more meaningful way to review documents and scrub data and for many other capabilities.
McKinsey: You’ve brought together several groups into one organization, which has grown rapidly. How would you describe your personal leadership style?
Gilles Dellaert: It all goes back to talent. It’s about enabling talent. My job is to help select, nurture, grow, and retain the best talent we can possibly find; then, for the most senior people, it’s up to me to enable and empower them. They’re experienced, very bright, and very talented; I want them to collaborate and do their jobs at an entrepreneurial firm and help them along the way in any possible capacity. I strive to be a leader who guides, mentors, and provides support to help people grow and set them up for success.
That ties into the culture of the firm. It’s an entrepreneurial, meritocratic place where talent can truly excel and succeed. If you give people access to our relationships, our scale, our platform, our technology, they can do incredible things. Culturally, that’s not only accepted but required. It’s a very flat organization, where we want people to speak up and have a seat at the table in our committees, from our youngest people to our most senior. As a leader, the culture I found here couldn’t have been a better fit for my leadership style. I love it.
McKinsey: People seem to be collaborative here and not territorial the way you might think.
Gilles Dellaert: Our leaders have really pushed to break down silos and any sense of turf or territorialism; it’s about winning together. We encourage team play across divisions. People here love to play team sports, and they do it in a nice way. The rule around here is: be nice to the people who sit next to you, your customers, whoever it is; treat them with the respect they deserve, and then good things happen.
McKinsey: Does any of this change as BXCI gets bigger?
Gilles Dellaert: Blackstone, led by Steve and Jon, has done a remarkable job as a firm in retaining our culture and performance, despite having 4,800 employees and over $1 trillion in assets, up from about 750 people and $80 billion in assets when we had our IPO nearly 20 years ago. When comparing BXCI with the broader firm’s growth story, the credit and insurance business is still in the early innings, and if we can do it at the firmwide level, of course we can do it here at BXCI.
