Market volatility opens way for new investment streams
Recent share market volatility caused by the fall in the Chinese equity market has illustrated the value of including non-market correlated assets in an investment portfolio, according to an industry fund manager.
An example of an asset displaying these characteristics is the Life Settlements Wholesale Fund, which has experienced significant growth since its launch in July of last year.
“As the markets in Japan and China went down 9 per cent and the world followed, 3 or 4 per cent in America and a little bit more in Australia, our fund was going up . . .We’re just not correlated to any market. We’ve got an asset, which is a life insurance policy that an insurance company in the US wrote a few years ago, and it’s not a case of if it will be paid but when it will be paid,” Life Settlements fund manager Chris Renouf said.
The fund buys life insurance policies from people in the US who have been advised by a financial planner that they no longer need that type of cover for a variety of reasons, like not having any more dependants to provide for.
“We only buy in America, as every life insurance policy has a non-contestability clause, which means if you’ve paid premiums for two years or more and the insurance company has accepted those premiums over that period of time … the claims cannot be contested,” Renouf explained.
An individual can only sell his or her life insurance policy after being advised to do so from a financial planner. The original policyholder stands to recoup up to 20 per cent, and in some cases more, of the face value of the policy, and the fund then makes a claim on the policy once the insured person named dies.
Life settlements offer the only open-ended fund of its kind in the world, and any profits made from the policies are distributed to unit holders quarterly.
“So investors get two forms of income, the distributions and the appreciation on the unit price,” Renouf said.
The fund currently has funds under management of close to US$143 million, of which Australian and New Zealand investors have accounted for 25 per cent. It has also managed to grow its unit price by 12.4 per cent over the past 12 months.
Retail investors can access the product via platforms such as Macquarie Investment and Super Wraps, BT Wrap, Avanteos and Oasis, and it has already been included on some dealer group approved product lists, the most recent being WealthSure’s.
Alternatively, they can invest in the product directly with an original subscription amount of $30,000.
Recommended for you
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
HUB24 has appointed Matt Willis from Vanguard as an executive general manager of platform growth to strengthen the platform’s relationships with industry stakeholders.
Investment manager Drummond Capital Partners has announced a raft of adviser-focused updates, including a practice growth division, relaunched manager research capabilities, and a passive model portfolio suite.
When it comes to M&A activity, the share of financial buyers such as private equity firms in Australia fell from 67 per cent to 12 per cent in the last financial year.
