Fitch Ratings sees relationships between U.S. alternative investment managers and life insurance companies through investment advisory agreements and equity investments as potential win-wins for all parties involved.

The rating agency said the investment managers could potentially benefit from recurring management fee revenue on greater fee-generating assets under management, while increasing assets under management diversification by product and geography. Life insurers, meanwhile, could also lessen interest margin pressure by earning higher yields on alternative investments while gaining access to investment expertise, particularly in private asset classes. Life companies could also use their relationships with alternative managers to exit underperforming legacy businesses, such as variable annuities, and free up capital.

One potential risk associated with these partnerships, according to Fitch, is that potential investment valuations are high as alternative managers hold record amounts of dry powder. High prices could pressure investment performance down the road, impacting insurance companies' returns and alternative managers' incentive fee income.