Senior Life Settlements create capital and mitigate risks in very different ways. Against the backdrop of an overvalued stock market, less-than-transitory inflation, supply chain bottlenecks, a global pandemic, and a US Federal Reserve that’s tightening its grip on monetary policy, billions of dollars are seeking the refuge of non-correlated returns in market alternatives.
We recognize that alternative investments are new territory for many. Learning something new isn’t always easy but it’s usually worthwhile. Let us make it a little easier for you.
Here are six reasons why Senior Life Settlements work to balance volatility risk in your portfolio and earn above fixed-income market risk-adjusted return:
- Life Settlements are truly non-correlated because the componentry is different. The investment earns an absolute total return because yield is driven by the maturation of a legally binding contract rather than timing the volatile swings in traded markets.
- Speculation, research, manager performance, track record and other metrics that investors weigh to buy stocks and funds do not apply here. A life settlement investment is a Time-to-Maturity play, period.
- The maturity value of the investment is the face value of the policy. It is printed right on the contract. The investor’s Spread or Yield-to-Maturity is the discounted acquisition cost against the face amount. Any other asset class’ value is only known when and in what market you choose to sell it. A life settlement’s value is known the day you buy it.
- Life settlements are a passive investment that avoids market and geopolitical risks because it’s a contract that is only affected by the mortality of the insured. No other catalyst has an effect.
- All the money, all the spread comes from the contract maturity. There is no other source of liquidity. There are many options out there that tout their funds pay current income have redemption windows and best-guess valuations. These bells and whistles serve no purpose other than to create the illusion that a quarterly management fee is justified.
- To extract all the value from a life settlement contract, policy selection, underwriting, and a system to manage premium reserves to combat extended longevity risk renders far more value than trading policies in the tertiary market to generate alpha and call it a coupon. The real value is in maximizing the discount to face and understanding exactly what you’re buying as thoroughly and transparently as possible.