Private Equity's Great Divide: Is The Future Insurance-Funded Or Fee-Driven?

A fundamental shift is taking place at the top of the private equity industry. While firms like Blackstone remain committed to a fee-based asset management model, others—most notably Apollo Global Management and KKR—are increasingly powered by capital from insurance affiliates. The divergence in strategy is more than cosmetic. It reflects two competing visions of how to grow, manage risk, and serve investors in an era defined by market uncertainty, regulatory scrutiny, and demand for stable returns.

The question is no longer just who generates the highest returns, but which structure offers resilience, scale, and long-term viability. As private markets continue to expand, the divide between fee-driven and insurance-backed models could redefine the industry’s financial architecture for years to come.

The Two Emerging Models

At the heart of this divergence are two distinct operating models:

Blackstone has stuck closely to a traditional approach. It raises capital from institutional investors—pension funds, endowments, sovereign wealth funds—and earns a combination of management and performance fees. Its focus is clear: maximise recurring fee income by scaling high-margin products in private equity, real estate, credit, and infrastructure. This strategy is rooted in a capital-light model that favours flexibility, transparency, and performance-based alignment.

Apollo and KKR, by contrast, have embraced insurance as a structural asset. Apollo’s merger with Athene and KKR’s acquisition of Global Atlantic gave each firm direct access to billions in annuity premiums and policyholder assets. These pools of capital are permanent, predictable, and do not rely on cyclical fundraising. Instead of waiting on LP commitments, these firms deploy capital directly from insurance affiliates—predominantly into private credit and structured products designed to match long-dated liabilities.

The difference is profound: Blackstone earns more per dollar of assets but manages less balance sheet risk. Apollo and KKR manage more assets, but at thinner margins and with greater exposure to insurance regulation.

Comparative Financial Structures and Growth Profiles

The structural differences are visible in the financial profiles of each firm.

Blackstone has built its growth on fund performance and fee-related earnings. Its operating margins remain among the highest in the industry, and the firm has consistently posted strong distributable earnings without significant balance sheet exposure. It relies on fund cycles, though, which means performance fees (carry) can be lumpy.

Apollo and KKR have taken a different route. Their AUM has ballooned thanks to insurance assets, and their growth has become more linear due to constant inflows from annuity businesses. However, those inflows come at a cost. Insurance capital tends to be conservative, limiting the risk profile and return potential. Moreover, managing these assets requires infrastructure that resembles a traditional life insurer more than a private equity firm.

The trade-off is one of stability versus upside. Blackstone benefits from performance-linked earnings, but is more exposed to fundraising cycles and market conditions. Apollo and KKR enjoy steady inflows and can scale faster, but with greater fixed costs and regulatory complexity.

Risk and Regulation Implications

The use of insurance capital introduces new layers of complexity.

Insurance subsidiaries operate under strict solvency requirements. Their asset allocation must match liability profiles, and they face oversight from national insurance regulators. This includes liquidity buffers, duration matching, and stress testing—all of which can constrain investment flexibility.

This raises a key risk differential. Blackstone, by avoiding insurance, maintains distance from solvency-driven regulation and does not face the same asset-liability matching burdens. It also avoids reputational risk from potential issues in retail insurance markets, such as underpricing annuities or failing to meet policyholder guarantees.

Apollo and KKR argue that their models offer resilience and predictability. They can invest through cycles, allocate across asset classes with speed, and benefit from the durable nature of insurance premiums. But this comes at the cost of increased operational complexity and the need to navigate dual regulatory frameworks—those of asset management and insurance.

Strategic Trade-Offs and Investor Preferences

Institutional investors are watching the divergence closely. Some prefer the purity of Blackstone’s model—transparent fee structures, clear performance benchmarks, and strong alignment through carried interest. Others are drawn to the insurance-powered platforms for their scale and stability.

Insurance assets bring long-dated liabilities, which are ideal for private credit and core real estate strategies. This allows firms like Apollo to match assets and liabilities more efficiently, generating stable net interest income. Yet some LPs question whether this model creates cross-subsidisation or blurs fiduciary lines between insurance policyholders and equity investors.

Retail investors, meanwhile, are increasingly present in both models. Blackstone is growing its wealth management arm and launching retail funds, while Apollo and KKR are distributing annuity products through affiliated insurers. Each strategy brings its own approach to democratising access—but also introduces questions about risk disclosure, product complexity, and suitability.

Long-Term Implications for the Private Capital Industry

The divide may widen before it narrows.

For now, Blackstone shows no sign of entering the insurance arena. Its leadership continues to emphasise its asset-light, fee-based model as the most scalable and risk-appropriate path forward. But if insurance-led platforms continue to compound capital at scale, Blackstone may face strategic pressure to reassess—either through partnerships, minority investments, or a bolt-on acquisition.

Conversely, Apollo and KKR must demonstrate that their insurance operations can avoid the pitfalls that plagued earlier hybrids—such as balance sheet bloat, mispriced liabilities, or regulatory overreach. Their challenge is not just capital allocation, but governance and risk transparency across integrated models.

Over time, regulators may also begin to distinguish between “clean” asset managers and those that also act as insurers. This could influence capital requirements, disclosure rules, or even systemic risk designations.

More broadly, firm culture is shaped by these models. Blackstone’s structure incentivises fundraising and investment performance. Apollo and KKR’s models demand actuarial discipline, balance sheet optimisation, and fixed income expertise. These are not just different strategies—they are different businesses under the same banner of private capital.

Conclusion

The private equity industry is no longer moving in a single direction. Blackstone’s fee-driven model and the insurance-led strategies of Apollo and KKR reflect two fundamentally different visions for the future of asset management.

One offers high margins and nimbleness, the other offers scale and stability. Both are valid. Both are competitive. But only one may prove more resilient in the long run.

For investors, regulators, and firms themselves, the challenge is to recognise that private equity is no longer a monolith. It is an ecosystem with diverging models, each with its own risks, rewards, and role in the capital markets of the future.

Author: Ricardo Goulart