Family offices are comfortable with private debt/private credit in a way that retail investors are still to address in the search for consistent returns for the defensive part of the portfolio.
In essence, they are more open to investing in a business that creates consistent, repeatable returns rather than depending on the traditional coupon from a bond.
Fixed income investors look to bonds to share in a company’s progress by buying their debt and waiting for the interest payments and then the redemption of the capital.
It’s not working this century because of low interest rates, heavy government borrowing and now Covid-19 is disrupting markets and expectations on returns.
And these problems won’t change – no one is expecting interest rates to rise and thus make new bond offerings more attractive.
Laureola suggests that fixed income investors look to the business to develop returns.
Life settlements are one example of a business where an investor is sharing immediately in the returns being generated as the life policies purchased come to maturity. And it is highly regulated and seen as an ESG outcome by regulators.
This is about investing in the business which is producing cash flow – not simply buying bonds in a company and hoping that the coupons paid on time and capital is returned.
A well-managed life settlement fund can be expected to generate 7-11% pa returns (in AUD terms). Such levels of returns can be expected regardless of inflation scenarios. The returns in life settlements are stable and consistent over the years.
Given the level of returns, life settlements can be relied upon as a bedrock in portfolio. The only inflationary scenario where life settlements might struggle would be a hyper-inflationary one (like the Weimar Republic in the 1920s).
For more information on Laureola and fixed income alternatives visit: Laureola Advisors
See also: Laureola fund being used by Asian and European family offices to unlock investment paralysis
Alex Lee CFA
Director, Investor Relations – Australia and New Zealand
Laureola Advisors Inc.
0434 269 987
Email: alee@laureolaadvisors.com