Managing Partners Group: Professional investors focus on life settlements

Managing Partners Group: Professional investors focus on life settlements

16 augustus 2023

Alternatives
Algemeen (29) rapport asset allocatie financieel plan

Professional investors are increasingly targeting Life Settlements as a major growth sector in the alternative assets space as more pension funds and wealth managers start to invest, according to new research from Managing Partners Group (MPG).

Nearly two out of five (36%) professional investors (pension funds, family offices, insurers and wealth managers) expect dramatic growth in investing in Life Settlement funds over the next five years, MPG’s research with wealth managers and institutional investors who are collectively responsible for £258 billion assets under management found. More than half (54%) predict a slight increase over the same time period.

Almost all (95%) professional investors questioned believe the expected growth in the number of Life Settlement policies available to invest in will mean more pension funds and wealth managers will invest in Life Settlements for the first time.

Life Settlements are US-issued life insurance policies that have been sold by the original owner at a discount to their future maturity value. They have little or no correlation to equites and bonds.

Data shows that between 2021 and 2022 around $8.5 billion was paid out to life insurance policyholders who sold to Life Settlement funds but the annual gross market potential capacity for Life Settlements is estimated to be as large as $220 billion highlighting the possible expansion of the sector.

The study among 100 professional investors across Switzerland, Germany, Italy, the UK and the US outlined further factors behind the growth of the sector with the ongoing rise in the cost of living seen as the major driver for policyholders wanting to cash in early.

The research for MPG, which manages the High Protection Fund investing in Life Settlements, also identified growing awareness among policyholders of the option to sell their policy for a cash sum that is in excess of the policy’s surrender value, that could be used to improve lifestyle in old age and/or fund the rising costs of long-term care. As the aging population continues to grow it is expected to generate an increasing potential supply of Life Settlements, which was seen as another positive factor.

Nearly nine out of 10 (88%) investors that were questioned, believe Life Settlement providers will increasingly advertise the benefits of selling the future benefits of their policies rather than surrendering them in. Nearly half (48%) expect the annual gross market potential for Life Settlements will beat estimates of $220 billion and exceed $250 billion.

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