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Alternative Market Briefing

Life settlements stand strong as some other 'Bedrock investments' are failing investors

Wednesday, March 17, 2021

amb
Tony Bremness
B. G., Opalesque Geneva:

Life settlements is one of the few asset classes that can protect portfolios against the deflationary scenario, deliver stable performance in a "muddle through" scenario, and even do well in a moderate inflation scenario, claims Laureola Advisors, a boutique life settlements asset manager with offices in the BVIs, the US and Canada. And all bubbles burst eventually.

According to managing director Tony Bremness, there are indeed bubbles all around: The S&P 500 was up 2.6% in February, Oil up 19% and the 10-year Treasury yield rose to 1.46%. Meanwhile, "signs of debt-filed asset bubbles grew: total US non-financial debt ended 2020 at a record of 292% of GED, total equity value at 308% of GDP, and total real estate at 171%. In the past 15 months, SPACS raised $156 bn", wrote Bremness in a recent commentary.

'Bedrock' investments are failing investors

"Perhaps the most surprising volatility was in the bond markets in early March, implying a capital loss of 8.7% for investors who bought this "bedrock" investment only 6 months ago. Real estate has also been long considered one of the safest investments globally, but US mall values plunged an average of 60% in 2020 due to Covid and related lockdowns, which have affected other segments of the economy as well.

"Credit Suisse, trusted by millions of investors, had ad to suspend a $10bn family of Funds due to an investment in Greensill Capital, a firm which speclialized in supply chain finance," Tony added. On the other hand, Life Settlements continued to trade in a range around 13%/14% IRR, with the usual dispersion around the average.

Laureola Investment Fund

The Laureola Investment Fund, a Bermuda fund for non-US investors with $68m in AuM returned 0.4% in February and an average of 7.2% per annum over the past 3 years, a period which includes the unusual month of Dec 2018. Realised gains made up 70% of total gains last month for the Fund.

Tony Bremness will present in the upcoming Corona Fighters REVISITED webinar on March 30th at 10 am EST.

"Supply continues to be tight, mostly as a result of the extensive Covid-19 news coverage. Very few will sell their life insurance policy if they believe that they could die in the next few months. This phenomenon is temporary, but is having an effect currently."

Preliminary reports on total volume in the secondary market last year show a 28% drop in volume. "That represents approximately 100 policies and $60m of capital per month, again highlighting the boutique nature of this asset class and the need for both investors and managers to recognize the importance of capacity constraints when investing in life settlements."

A life settlement refers to the sale of an existing insurance policy to a third party for a one-time cash payment. Payment is more than the surrender value but less than the actual death benefit. After the sale, the purchaser becomes the policy's beneficiary and assumes payment of its premiums. By doing so, he or she receives the death benefit when the insured dies.


Related article:
25.Aug.2020 Opalesque Exclusive: Life settlements as an alternative to private credit strategy

***

Next Webinar:

Corona Fighters REVISITED

The "winners of the winners": Strategies that not only performed in Q1 2020 but also during the rebound later that year.
With:
• Stephane Prigent, Katch Investment Group
• Michelle Leung, Xingtai Capital
• Tony Bremness, Laureola Advisors
• Jagdeesh Prakasam, Rotella Qdeck

When: Tuesday, March 30th at 10 am EST
Free registration: www.opalesque.com/webinar/


***

On a separate note, you can listen and subscribe to Opalesque's Clubhouse podcasts here:

Register here if you are interested in speaking at a future Clubhouse session of the Clubhouse Alternative Investment Club: https://www.opalesque.com/clubhouse/


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