In a letter dated 4 November, shareholders were informed that, despite having hoped to recover 33% of the original value of the fund at the time of an EGM in May, as a result of “additional adverse influences” the directors now expect the “return” to be “closer to 8%”.
Final closure of the fund is expected this month.
By way of explanation, the letter, which was distributed by the Active Group, states: “The fund has been severely affected by the changes in life expectancies by the two major life expectancy companies.
“This has occurred twice since launch of the fund and is in addition to the market’s reaction to the Financial Conduct Authority’s comments. The latest review conducted by 21st Services has increased the life expectancies by approximately 30% which has had a devastating effect upon the policies valuation and marketability.
“This uncertainty in the calculation of life expectancies has likewise affected market valuations, resulting in the market increasing their purchase Internal Rate of Return required from a traditional 12% to in excess of 20% to 25%.”
The fund was originally closed in 2011. It invested in a portfolio of trade life policies (or senior life settlements) which are life insurance policies issued on the lives of US citizens over 65 years of age and which have been sold into a secondary market.
The manager of the Guernsey listed fund was PSG Fund Management (CI), while the custodian was BNP Paribas Trust Company.
An original brochure used by the company said targeted returns for the fund would be 9% net per annum, with an option to take up to 7.5% of investment annually with no penalty. It was part of the International Mutual Fund PCC.
The same brochure also offered the following quote from Benjamin Franklin, suggesting the fund was based on one of life’s certainties: “In this world nothing can be said certain, except death and taxes.” Perhaps the outcome was not so certain after all.
