Professional Investors Focus On Life Settlements As Alternative Assets Sector Grows

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  • Nearly two out of five expect dramatic growth as pension funds and wealth managers start to invest in the sector, new research shows
  • Strong annual returns are driving growing interest in Managing Partners Group High Protection Fund investing in Life Settlements

Professional investors are increasingly targeting Life Settlements as a major growth sector in the alternative assets space as more pension funds and wealth managers start to invest, according to new research (1) from Managing Partners Group (MPG), the international asset management group.

Growth In Investing In Life Settlements

Nearly two out of five (36%) professional investors (pension funds, family offices, insurers and wealth managers) expect dramatic growth in investing in Life Settlement funds over the next five years, MPG’s research with wealth managers and institutional investors who are collectively responsible for £258 billion assets under management found. More than half (54%) predict a slight increase over the same time period.

Almost all (95%) professional investors questioned believe the expected growth in the number of Life Settlement policies available to invest in will mean more pension funds and wealth managers will invest in Life Settlements for the first time.

Life Settlements are US-issued life insurance policies that have been sold by the original owner at a discount to their future maturity value. They have little or no correlation to equites and bonds.

Data shows that between 2021 and 2022 around $8.5 billion was paid out to life insurance policyholders who sold to Life Settlement funds but the annual gross market potential capacity for Life Settlements is estimated(2)  to be as large as $220 billion highlighting the possible expansion of the sector.

The study among 100 professional investors across Switzerland, Germany, Italy, the UK and the US outlined further factors behind the growth of the sector with the ongoing rise in the cost of living seen as the major driver for policyholders wanting to cash in early.

The research for MPG, which manages the High Protection Fund investing in Life Settlements, also identified growing awareness among policyholders of the option to sell their policy for a cash sum that is in excess of the policy’s surrender value, that could be used to improve lifestyle in old age and/or fund the rising costs of long-term care. As the aging population continues to grow it is expected to generate an increasing potential supply of Life Settlements, which was seen as another positive factor.

Nearly nine out of 10 (88%) investors that were questioned, believe Life Settlement providers will increasingly advertise the benefits of selling the future benefits of their policies rather than surrendering them in. Nearly half (48%) expect the annual gross market potential for Life Settlements will beat estimates of $220 billion and exceed $250 billion.

MPG’s High Protection Fund is seeing strong demand for Life Settlements as a growing part of the alternative assets sector. It delivered net annualised returns of 9.27% in 2022 and attracted net inflows of $20 million. The High Protection Fund has returned 296.91% since it was launched in July 2009. It aims to achieve smooth predictable investment returns of between 8% and 9% per annum, net of fees.

Jeremy Leach, Chief Executive Officer of Managing Partners Group commented: “Fund managers specialising in life settlements have consistently generated high single digit annual returns and current market pricing delivers an annualised yield or IRR of 12%. It makes sense that as an asset class they will become increasingly attractive given inflation plus the risk-free rate from investing in life settlements and the lower returns available from other asset classes.”

MPG is a multi-disciplined investment house that specialises in the creation, management and administration of regulated mutual funds and issuers of asset-backed securities for SMEs, financial institutions, and sophisticated investors. It currently manages two funds with a combined gross value of $500m.

High Protection Fund

High Protection Fund (the “Fund”) was launched in 2009 and is an absolute return fund that aims to achieve smooth predictable investment returns of between 8% and 9% per annum, net of fees.

The fund offers share classes in a number of different currencies and aims to deliver returns by investing in life settlements or Traded Life Policies (TLP’s) or companies that invest in TLPs.

Life settlements are US-issued life insurance policies that have been sold by the original owner at a discount to their future maturity value and are institutionally traded through a highly regulated secondary market. The market increasingly includes high profile institutional investors and service providers, including Apollo Global Management, GWG Life, Vida Capital, Broad River Asset Management, Red Bird Capital Partners, Partner Re, SCOR, Berkshire Hathaway, Coventry First, Wells Fargo, Bank of Utah, Wilmington Trust, and Credit Suisse Life Settlements LLC.

The standard deviation in its performance has been 0.13% since launch and its Sharpe Ratio of 4.4323 reflects its excellent consistency in outperforming the risk-free rate. The fund has no initial charge or performance fees which has given it a performance edge on competing funds within the life settlement sector.

Vita Nova Hedge Fund

Vita Nova Hedge Fund is a mutual fund that aims to achieve long term capital growth by identifying short to medium term investment opportunities with inherent pricing weaknesses and the potential to improve over time. The fund’s investment management team may rely on economic forecasts and analysis in respect of interest rate trends, macroeconomic developments, global imbalances, business cycles and other broad systemic factors to identify pricing weaknesses with the potential to strengthen over time.

Where the Manager identifies value opportunities it has the ability to use gearing to over invest wherever possible whilst preserving liquidity to afford relatively quick changes to the portfolio weighting and to take advantage of short-term arbitrage and alpha opportunities.

Vita Nova Hedge Fund may hold other investments including cash or near-cash assets, units or shares in other collective investments schemes, listed securities and registered companies.

Vita Nova’s annualised rate of return since its launch in August 2014 is 22.05% with a standard deviation of 1.81% and a Sharpe Ratio of 0.5378.

For more information on Managing Partners Group see: