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Matthias Knab, Opalesque for New Managers: When "alternatives" start moving with everything else, they aren't really alternatives anymore. Here's a first-principles look at where diversification still lives - and how life settlements may turn illiquidity into alpha.

The problem: Many strategies marketed as "alternative" have drifted toward mainstream beta, becoming increasingly correlated with equity and credit risk. That defeats the core purpose of an alternatives sleeve: resilience when markets break.

Back to basics: As veteran longevity-linked assets specialist Tony Bremness argues, authentic alternatives once rested on three pillars: portfolio diversification (uncorrelated return streams), attractive risk-return, and access to truly unique opportunities. Much of the market has strayed from those foundations.

Illiquidity Premium? Mind the Gap.

Private markets are supposed to pay investors for locking up capital. Yet recent dynamics suggest the premium has eroded in multiple sectors. In private equity, even amid record public market valuations, exits have stalled - fueling continuation vehicles (and even "CV-squared") that extend holding periods by 5 - 7 years. If you can't sell at record highs, when can you sell?

Private credit isn't immune either: rising default rates and more payment-in-kind (PIK) usage signal underwriting dilution after a tsunami of capital - a mathematical dilution of quality that accompanies rapid inflows.

The Correlation Creep

"Risk-on/risk-off" market structure has pulled many once-differentiated strategies into the same current. Crypto, trend-following, and even parts of global macro often trade with broader risk sentiment - especially in stress, when correlations tend to rise just as you need diversification most.

Bottom line: If your "alternatives" depend on the same drivers as equities and credit, you may be paying alternative fees for mainstream risk.

Life Settlements: An Authentic Alternative

Why they stand out:

• True non-correlation: Returns are driven by mortality/longevity - not interest rates, earnings cycles, or macro beta; the non-correlation is structural, not episodic.


• Self-liquidating asset: Policies mature and return capital organically, reducing exit risk; in closed-end funds, distributions commonly begin around year three and most capital is returned by years five to six.


• Minimal credit risk: Exposure is to highly rated insurers; regulatory oversight provides early warnings of deterioration.


• Real illiquidity premium today: With capital flowing out of the space and transaction prices ca. 30% below two years ago, entry points have improved for patient allocators.

The investment proposition: For institutions able to hold 7 - 9 years, managers target ca. 8 - 12% net IRR (ca. 1.6x - 1.7x MOIC) validated via 1,000+ actuarial simulations under current conditions - without the elongating timelines plaguing other private markets, because profits are paid out rather than recycled.

Who It Fits

• Endowments & Foundations: Perpetual horizons and a premium on genuine diversification.
• Pension Plans: Long-dated liabilities and appetite for predictable cash flows from self-liquidating assets.
• Family Offices: Counterbalance to concentrated operating-business or VC exposure across generations.

Strategic Timing

While crowded private equity/credit wrestle with exits and deteriorating underwriting, life settlements are experiencing the opposite setup: capital outflows, better pricing power, and a structural, cycle-resilient return driver. If you believe markets are becoming a more dangerous place for correlated risk, this is a timely candidate for the "true alt" sleeve.

If you're tasked with restoring true diversification in a correlated world, this session is designed for you.

Register now and bring your toughest allocation questions.