(Bloomberg) -- Goldman Sachs's Mike Siegel, who oversees $220 billion for insurers at the bank's asset-management unit, said clients are planning to increase bets on loans and private equity, while scaling back on government debt.

"They're more optimistic on credit, and will be taking more credit risk," Siegel said at a briefing in New York, discussing a survey of more than 300 executives, representing over $10 trillion of insurance assets. "Companies think growth is going to continue. The recession is not a 2017 event, and therefore credit will be better behaved."

Insurers have been seeking to diversify their portfolios after low interest rates squeezed investment income from traditional holdings such as highly rated, liquid bonds. They've been turning to third-party asset managers to boost returns and handle more complicated wagers. More than a third of those surveyed expect to increase private equity holdings, while only 4% said they intend to reduce such assets.

Middle-market corporate loans, infrastructure debt, collateralized loan obligations and U.S. investment grade corporate bonds were the only other holdings that at least 30% plan to increase. Investment grade credit in the world's largest economy was named in 2016 as the most likely asset to add to portfolios, and that turned out well. Such corporate bonds returned more than 6% last year.

Only 12% plan to increase hedge fund allocations, while 9% foresee reductions. MetLife is among insurers that have been cutting such holdings, because of either large fees, uneven returns or high capital charges. However, the New York-based company's private equity holdings increased to $5.8 billion at the end of December from $5.2 billion a year earlier.

REAL ESTATE

Among insurers, "generally, they think anything that has equity attached to it will perform well: public equity, private equity, real estate equity. They think government debt and cash will not perform well," Siegel said. "Even though they think that equities will be the best performer, the major asset class is fixed income."

Regulators, ratings firms and some investors tend to encourage insurers to focus on the more predictable returns of fixed income. Still, within that class, companies are shifting allocations. Middle-market corporate loans, which have floating rates, will perform well if interest rates rise, Siegel said.

More than half of the executives in the survey listed political events as one of the top three risks to their investment portfolios this year. That compares with only 19% a year earlier, before U.K. citizens voted to leave the European Union. Another increasing threat is the tightening of monetary policy in the U.S., according to those surveyed.

The risk of recession, however, was deemed lower than a year earlier in the U.S. and China.

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