Hedge Fund Era Ending as Industry Embraces Longer Time Horizon Investors
March 27, 2014- ATLANTA–(BUSINESS WIRE)–The life settlement industry is currently undergoing a significant shift in funding strategies and taking a new approach toward institutional investment, according to Wm. Scott Page, president and CEO of life insurance settlement pioneer The Lifeline Program. Hedge funds, long seen as a savior of the industry, appear to be falling out of favor as the industry looks to pension funds, endowments and large family offices as sources of long-term capital.
“We have found that a typical hedge fund manager wants a funding cycle of less than seven years while most life settlement providers are seeking capital for a 10-12 year commitment.”
Page points out that while some hedge funds have had success in the life settlement industry, the average life span of these funds is shorter than the typical funding horizon required by the life settlement industry.
Longer-term time horizons needed
“Many life settlement providers have worked closely with hedge funds in the past, but the long-term goals of these funds don’t necessarily align with those of our industry,” said Page. “We have found that a typical hedge fund manager wants a funding cycle of less than seven years while most life settlement providers are seeking capital for a 10-12 year commitment.”
Pension funds, endowments and large family offices have recently entered the life settlement marketplace, and Page believes these entities have the long-term outlook necessary for successful investment. He also points to interest from the life insurance industry itself. Page further states that the industry is not seeing an exodus of hedge funds, though some have exited the industry due to other issues.
“Well constructed life settlement portfolios can have long term returns in the low- to mid-teens, but a commitment of more than 10 years is typically required,” said Page. “When capital partners understand the long-term value, the industry is very attractive.”
The Lifeline Program is a life settlement provider in Atlanta, Ga. Founded in 1989, the company offers the Life-Changing Solution assisting baby boomers, seniors and their families by purchasing unwanted or underperforming life insurance policies for immediate cash. The Lifeline Program actively educates and partners with insurance agencies, estate planners, financial planners, estate trustees and broker-dealers to establish life settlement business lines. For more information on investment strategies involving life settlements, contact Scott Sanders of The Lifeline Program at 770-724-7300 or visit www.thelifeline.com.