Life settlements is a potentially
profitable alternative for sophisticated investors, particularly
those seeking an asset class uncorrelated to capital markets,
believes Ryan Bisch, a senior associate at consultancy Mercer’s
Alternatives Boutique in Melbourne, Australia.

“The global financial crisis was a
wake-up call for many investors who realised that traditional
alternative assets, such as hedge fund of funds, had failed to
provide investors with adequate strategy diversification,” said
Bisch. “Life settlements provide a genuine alternative because they
are based on bearing longevity risk as well as exploiting
structural inefficiencies in the life insurance market, rather than
mainstream capital market risk premia.”

Go deeper with GlobalData

Data Insights

The gold standard of business intelligence.

Find out more

Bisch noted that deal-flow in the
life settlement market grew from an estimated $5.5bn in 2005 to
$11.7bn in 2008 before dropping sharply to $8bn in 2009.

“There were several factors behind
the decline in demand, including the difficulty of raising capital
during the downturn, the after-effects of extensions of life
expectancies in late 2008, and competition from new asset classes,”
said Bisch.

He continued that Mercer expects
that the market will rebound during 2010 and is likely produce
volumes closer to 2008 levels.

Though Birch believes life
settlements will continue to grow, he advised investors to be
cautious in what is an asset class untested in a mainstream
institutional investor context.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

“Investors need to be cognisant that with this type of strategy
they are bearing longevity risk,” said Bisch. Understanding the
intricacies of this risk is critical, and for many institutional
investors already exposed to the risk of mortality improvement,
such as defined benefit pension schemes, life settlements may not
in fact be appropriate.”