The WAY Life Settlements Fund
The Rationale for Life Settlements
In the US, a life company can only contest a life policy in the first two years. After that it cannot be contested. That's why all the policies in the WAY/EEA fund will be more than two years old when purchased...
The volatility of equity markets has led many potential investors to 'sit on their hands'. Whilst history may record long-term equity investment as highly rewarding, it does not suit everyone and/or everyone's circumstances to travel on what looks like a bumpy ride. This may particularly apply to investors whose foremost concern is to provide a shelter from the pernicious inheritance tax regime and save 40% on their already taxed assets. Having cultivated a nest egg to pass on to beneficiaries there is an understandable disquiet about exposing it to the short-term vagaries of the
world's stock markets.
Rewards
In recognition of this concern, WAY has launched its own class of a fund which has shown over the last three years that consistent, non-volatile but meaningful returns are achievable without correlation to equity markets. The fund, which has grown to over $700m in size is managed by EEA Fund Management (Guernsey) Limited and is focussed on the United States Life Settlements market. It has provided investors with 49 straight months of positive returns (to February 2010). (Source: EEA Fund Management (Guernsey) Limited, as at: 1st March 2010).
Policy Selection
A Life Settlement Fund is, in simple terms, a fund which holds life assurance policies sold to that fund by a life assured. The fund manager has two certainties - the purchase price and the maturity value. The unknown factor is the number of premiums that the fund will have to cover before the maturity value of the policy is paid out. Thus the critical management aspect is in the selection of policies to purchase and the monitoring of those plans when held by the fund. The fund currently holds in excess of 550 policies issued by over 90 life companies. (Source: EEA Fund Management (Guernsey) Limited, as at: 1st March 2010).
Certainty
Regulation in the US is such that policies which have run for two years cannot be contested on the grounds of non-disclosure, there is therefore certainty of pay out which does not exist in UK. Policyholders are prepared to sell for a variety of reasons - premiums have become too expensive (plans would otherwise lapse), capital is needed right now, the insured no longer has surviving dependents etc. Surrender values on US life plans are low and so a purchase offer from a Life Settlements Fund is a welcome boost to finances.
Link to: WAY Life Settlements Fund Plan Documents