A new Melbourne-based company is hoping to interest investors in the UK’s fast-est-growing investment sector – Traded Endowment Polices (TEPs).
The market for TEPs in the UK has risen from £5 million in 1991 to more than £200 million in 1996, says Traded Endowment Policies director Alan Gostin.
“This year the market is expected to be worth more than £300 million,” he says.
The policies have been around in the UK for 150 years and policyholders have sold on their TEP mid-term to raise instant
A new Melbourne-based company is hoping to interest investors in the UK’s fast-est-growing investment sector – Traded Endowment Polices (TEPs).
The market for TEPs in the UK has risen from £5 million in 1991 to more than £200 million in 1996, says Traded Endowment Policies director Alan Gostin.
“This year the market is expected to be worth more than £300 million,” he says.
The policies have been around in the UK for 150 years and policyholders have sold on their TEP mid-term to raise instant cash. For the purchaser, the full endowment is payable on expiry of the policy unless the original holder dies suddenly.
The returns for a TEP with 10 years of life left is 9.2 per cent, says Gostin and this rises to 12.2 per cent with a 25-year policy.
Gostin says on average he will be offering TEPs with about three to five years before maturity, although he has already sold some 10-15 year TEPs to Australian investors.
“The attraction of TEPs is their security as I only deal with the top 30 life companies in the UK. These include names familiar to Australian investors such as Prudential, Norwich, Legal & General and Pearl, part of AMP.
“In the UK, the people who have these TEPs, only 25 to 30 per cent hold onto them, the rest are sold in the secondary market. With the low risk and good re-turn, demand has made them the hottest investment,” he says.
There is a currency exposure factor as the TEPs have to be bought in Sterling, but Gostin argues that only really becomes a problem when the funds are bought back on-shore due to capital gains tax.
Gostin is also selling Australian TEPs, but says the returns are not so good, averaging about 7 per cent.
In their eagerness to expand the global market, UK dealers are allocating a num-ber of TEPs to companies like Gostin’s, but he says the demand often means the policies are traded within 24 hours.
The UK brokers are also paying Gostin’s company the sales commission, so inves-tors pay no entry fees other than the cost of purchasing the TEP.
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