Islands-based specialist in traded life insurance policies,
predicts the already fast-growing life settlements market is set to
boom. PSL’s optimism is well grounded given the performance of its
Assured Fund, an open-end mutual fund focused on investment in US
traded life policies.
Research undertaken by PSL leaves little
doubt as to traded life policies’ attractiveness as an investment,
whether compared with passively or actively managed
alternatives.
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As an example of passively managed
alternatives PSL selected the Royal Bank of Scotland’s RBS FTSE 100
Tracker Fund, a mutual fund that tracks the performance of the UK’s
benchmark equity index the FT100.
According to PSL, an investor who put
£10,000 into the tracker fund on 1 January 2005, the date when the
Assured Fund started trading, would on 1 November 2008 been sitting
with an investment worth only £9,801.
Had the £10,000 been invested in the
Assured Fund Sterling Class B shares over the same period it would,
according to PSL, have been worth £14,484. This represented a total
increase of 44.8 percent and an annualised CAGR of 10.1
percent.
Turning to actively managed mutual funds
PSL looked at several that are popular with many independent
financial advisers (IFAs), including Invesco Perpetual’s High
Income Fund.
The fund, which focuses on UK equity and
is one of the most successful in its class, achieved a total gain
of 14.56 percent between 1 January 2005 and 1 November 2008.
Actively managed UK money market and bond
market funds could also not match the Assured Fund’s performance.
For example, New Star’s Money Market Fund achieved a total gain of
15.06 percent between 1 January 2005 and 1 November 2008 while
Allianz Pimco’s Gilt Yield Fund achieved a minimal 0.66 percent
increase.
Assured Fund’s US dollar denominated
shares have achieved similar performance. For example, between
their launch on 16 February 2004 and 30 November 2008 Class A
dollar shares recorded a gain of 67.55 percent – an annualised CAGR
of 11.36 percent. This trounced the US equity market which measured
in terms of the Dow Jones Industrial Index (DJI) fell by 18 percent
over the period.
Of particular significance in the Assured
Fund’s performance has been consistency. This was aptly illustrated
between November 2007 and November 2008, a period during which the
DJI fell by almost 40 percent and the fund’s Class A dollar shares
gained some 10 percent in value.
Not surprisingly the fund’s performance
provides an ideal marketing platform.
“If you are an IFA with clients typically
in the 60/65 plus age bracket and crying out for better performance
from their investment portfolios, are you going to keep pointing
them in the direction of loss-making equity funds?” said PSL
finance director Andrew Walters.
Hammering home his point, he added: “Or
are you going to encourage them to cut their losses and look to
invest in an asset class which is actually producing demonstrable
returns? It would appear to be a no-brainer.”
The Assured Fund, which ended November
2008 with total assets of $385.3 million, is divided into share
classes denominated in US dollar, sterling, euro and Swiss francs
with annual management fees ranging from 0.75 percent to 2.25
percent of assets.
All policies in the fund are written by US
insurers rated A or above by Standard & Poor’s and are based on
the lives of US citizens.
The Assured Fund’s valuation model is
verified by German actuarial firm, Institut fur Finanz und
Aktuarwissenschaften.
