When looking at asset class returns over the last ten years*, it is easy to see the shifting fortunes of asset classes from one year to the next. If an investor seeks stability in returns, what should be the characteristic to look out for?
One tell-tale sign is consistency of returns over a long timeframe. In the graphic below, we plot Laureola Investment Fund’s performance against 12 other major asset classes as provided by the Blackrock Investment Institute. The stars represent actual performance of the fund in the calendar year since its inception in 2013.
The outperformance of Laureola’s life settlements fund is clearly shown.
However, in today’s muted economic environment, Laureola expects returns within the 8-12% range (in USD terms). Using 8% as a base rate of performance, this is represented by the black line running through the chart. This black line highlights a hypothetical scenario how an expected 8% return would compare with other asset classes for the last 10 years.
Slow and steady does win the investment performance race for Laureola. These expected returns might not be the top performing asset each year. However, when reviewing the 10-year annualised numbers in our hypothetical scenario, an expected 8% pa return would be in the top 3.
Source: Blackrock Investment Institute and Laureola as of Jan 2021.
* With thanks to Blackrock Investment Institute’s interactive page.
Life settlements are resold life insurance policies
Laureola is a fund manager with a specialisation in US life settlements. Life settlements are resold insurance policies and can be understood as financing to individuals backed by that person’s life insurance policy.
The Manager believes that life settlements are a social good because the existence of a secondary market for insurance policies provides insured persons, usually seniors, with more choices in obtaining liquidity. The insured can obtain a higher cash value for his/her policy. The insured effectively obtains better liquidity terms than otherwise available from the insurance company.
In other words, life settlements give the individual policy owner more control and promotes equality amongst participants in the life insurance industry. The life settlement industry is paying forward the death benefit to the insured while he/she is still alive.
Ongoing, the life settlement investor continues to pay premiums on the policy until maturity and are then compensated with the full-face value of the policy when it matures (when the insured dies).
When viewed with such lens, one can see how the life settlement is disrupting the insurance for the good of the insured.
The US Government seems to agree, as one of the most recent laws is a bill introduced earlier in 2020 (the Senior Health Planning Act) providing better tax incentives for seniors to sell their policies to the life settlement market.
Alex Lee CFA
Director, Investor Relations – Australia and New Zealand
Laureola Advisors Inc.
Email: alee@laureolaadvisors.com
Laureola Advisors
Tony Bremness is based in Europe and can be contacted at Tony.Bremness@laureolaadvisors.com