Share market volatility has proved to be a boon for Australia’s first life settlement fund, which has recorded stellar growth to nearly $800 million in funds under management (FUM).
The Life Settlements Wholesale Fund (LSWF), launched in October 2004, has become one of the largest of its type in the world.
Its FUM has rocketed from half a billion dollars in August 2007 to $788 million. It owns 380 life insurance policies with a face value of US$1.2 billion.
“The fund has consistent earnings upside, little or no debt and will pay a dividend on maturing policies,” an LSWF spokeswoman said.
“This positions LSWF as an alternative for investors who are thinking defensively and looking to take some of the risk out of their portfolios.”
LSWF buys life insurance policies in the United States from wealthy policyholders aged 65 and older.
Policies are bought at a discount of between 50 per cent and 70 per cent of their face value.
When the policyholder dies, the fund receives the full face value, so the yield is determined by time, not market forces.
The average age of policyholders is 80 and the average life expectancy is 60 months. The portfolio is diversified across 59 insurance companies.
LSWF has investors in a dozen countries and recently began marketing in Singapore.
US-based Conning Research and Consulting estimates in 10 years the potential size of the US life settlement market could range between US$90 billion and US$140 billion in policy face amount a year.
The fund is available on six platforms in Australia – BT Wrap, Macquarie Investment Manager, Strategy, Portfolio Focus Essentials, Symmetry and Access121.
The minimum wrap investment is $1000 and wholesale investment $30,000.
