The sale by Mark Walter and Todd Boehly of their stake in Chelsea FC to Clearlake Capital has featured big on the sports pages this week.

Behind the exit is an alarming backstory which ought to give pause to regulators, the insurance world and ultimately pensioners and other insurance clients.

Walter and Boehly are principals at private equity firm Guggenheim Partners and part of a broader trend that is seeing private equity firms buy insurance assets.

Most of this activity, so far, has been confined to the US. However, during an August heatwave, CVC Capital Partners revealed it was forming a strategic partnership with Standard Life (formerly Phoenix), which manages £300billion of assets belonging to 12million mainly British pensioners and future retirees.

CVC’s press release talked excitedly of giving Standard Life access to private investment opportunities such as ‘asset-backed lending, structured credit, real-estate credit’ and much more.

In other words, funky, less transparent investments of the kind that experts at the IMF and the Bank of England fear could be the source of the next market meltdown.

Closely regulated insurance and pension providers generally invest premiums in safe assets such as sovereign debt, defensive quoted shares and infrastructure projects. Only a small proportion of their portfolios are devoted to riskier assets.

Walter and Boehly at Guggenheim, once removed from public markets, turned this approach on its head.

They invested insurance premiums and future retirement funds into private loans and sports franchises such as the Los Angeles Dodgers, the LA Lakers and Chelsea.

As innovative as that has been, it has led to concerns among US regulators about inadequate liquidity in the funds.

This has required recent high-value disposals of assets, including the record-breaking $12billion sale of the Lakers and the £950million disposal of the Chelsea stake.

Private equity giants such as Apollo and KKR have been snaffling insurance assets. It is a trend continuing at pace with more than 18 per cent of annuities – pension payouts in the US – now in these hands.

Chunks of this money are helping to support the expansion of AI. The mismatch of these speculative assets with the insurance promise to pay retirement benefits is quite frankly a nightmare. 

The concern is that, as was the case with Walter and Boehly, there could be insufficient liquidity to pay current and future retirees.

Even more frightening is that, should the AI investment bubble burst, ordinary savers for retirement and pensioners could suffer real harms.

Britain’s financial regulator, the Financial Conduct Authority, is alive to the potential risks of insurance and pension assets being invested in sport, AI-related loans and exotic financial products of the kind that blew up during the 2008 financial crisis.

As we learned then, when British lenders were brought to their knees by holdings of duff mortgage securities, financial markets are borderless.

The reorganisation of capital at Chelsea shows that. Deals such as CVC’s partnership with Standard Life will need new, robust guardrails if savers and pensioners are to be protected.