Life Fund, as it is called, is being promoted to international private and institutional investors, and has already received a number of inquiries, according to Andrew Walters, a director of the fund, who is also finance director of Policy Selection Ltd, the new fund’s adviser.
The fund has already attracted $10m and is aiming to raise $50m to $100m of investment by August 2012, with a targeted annual return to investors of 12% a year, Walters said.
It is expected to sell particularly well among investors in South America, he added, where the appetite for life settlement products is currently said to be strong.
The new fund is being managed by the Ironshore Group, a Bermuda-based insurance company, and administered out of Dublin by Maples Fund Services.
Policy Selection, which is based in the Cayman Islands, is best known for its Assured Fund, a life settlement fund that has returned an annualised growth of 8.5% (class A) since it launched in February 2004.
“The Life Fund builds on the experience of the industry, and takes advantage of the ample supply of good quality assets,” Walters said.
“The investment strategy is relatively straightforward – to buy life insurance policies at a deep discount on the second hand market from American senior [citizens], and to hold them until the demise of the insured and to collect on the face value.”
Forecasting improved
The life settlements industry is relatively young – dating back no further than the 1980s – and as a result, longevity assumptions, on which its product prices are based, have sometimes been inaccurate, industry experts say.
This is in large part because recent medical advances have meant policyholders are often living longer than the underwriters – on whose predictions these funds are structured – have been predicting they would.
For this reason, Walters said, the new Life Fund will use life expectancy quotes from two different underwriters, which he said are among the industry’s “most consistently accurate firms”.
“By blending the two forecasts, Life Fund will not be exposed to any one company’s bias,” he noted.
“Better estimates than have been historically available will mean that the returns of the fund will accurately reflect the performance of the underlying assets.”
Buyer’s market
Although investors continue to be interested in life settlements because of their high returns relative to most other product options available, Walters said, the softness of world investment markets generally has reached the life settlements sector, which he noted is “now very distinctly a ‘buyer’s market’”, thus making greater returns for investors potentially more possible than was the case previously.
“Currently there is ample supply of sellers and very few buyers, and therefore any bidding process ends quickly, with assets changing hands cheaply.”
IA Fund Facts
Name: Life Fund
Domicile: Cayman domiciled; administered in Dublin
Minimum investment: $25,000
Type of fund: Open-ended
Annual charge: 1.25% (institutional share class)
Launch date: 1Oct, 2011
Manager: Ironshore Group Ltd
AUM: $10m
Targeting a yield of: 12%pa
