83% of professional investors predict growth with life insurance policies lapsing or being surrendered boosting supply
The life settlements asset class is set to see growing institutional investment attracted by its stability of returns and safety as supply of policies continues to rise, new research* from international asset management company Managing Partners Group (MPG) shows.
Its study with 100 professional investors who are collectively responsible for $276 billion assets under management found 83% forecast growth in the money pouring into the sector from institutional investors over the next five years.
Around 12% of the professional investors questioned in Switzerland, Germany, Italy, and the UK predict dramatic growth in institutional investment over the next five years with part of the growth down to increased supply. Investment management firm Conning** estimates $200 billion in life insurance is set to be surrendered or lapse every year until 2027.
The Shift To Life Settlements
Life settlement transactions involve US life insurance policy owners selling their policy to an investor for a lump sum lower than the death benefit but higher than its cash surrender value. The investor, who is often a professional fund manager, then maintains the policy and collects the death benefit on maturity.
MPG’s research shows around 43% of professional investors who are planning to cut exposure to bonds and equities will shift money into life settlements, marginally behind the 49% planning to move money into commodities.
The study found more than half (55%) of professional investors say life settlements will one of the top three most popular asset classes with institutions over the next three years. That is marginally lower than the 59% who put high yield bonds in their top three and ahead of the 45% who chose commodities in their top three.
MPG’s High Protection Fund, which invests in life settlements, has returned 283.77% since it was launched in July 2009. The fund has no initial or performance fees which has given it a performance edge on competing funds within the life settlement sector.
Safety, Stability & Greater Diversity
Jeremy Leach, Chief Executive Officer of Managing Partners Group said: “Institutional investors including pension funds, hedge funds, reinsurers, and other major financial corporations are already investing in life settlements due to the stability and safety of returns.
“The rapid growth of supply of life insurance policies lapsing and being surrendered in the US is expanding the investment opportunity and professional investors are confident that will translate into increasing institutional investment over the next five years.”
Life settlements 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 Suisse Life Settlements LLC.
MPG’s High Protection Fund offers investors the opportunity to diversify away from traditional investment funds by providing a unique opportunity to participate in an investment strategy that offers attractive growth potential with a low level of volatility.
It is an absolute return vehicle that aims to deliver long-term capital growth of between 8% and 9% per annum by investing in a portfolio of life settlements. MPG is a multi-disciplined investment house that specializes 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 funds with a gross value of $500m.
For more information on Managing Partners Group see: www.managingpartnersgroup.com.
*Research conducted among 100 institutional investors and wealth managers in Switzerland, Germany, Italy, and the
UK for Manging Partners Group by independent research agency PureProfile during September 2022.