Original article appeared LISA.org on 23.04.07
By Beatrix Payne – Crain Communications
Large Dutch pension plans are turning to the securitized life insurance policies, or life settlements, as a new source of uncorrelated returns.
Cordares, the multiemployer pension manager, whose clients include the €18 Billion Stichting Bedrijfstak Pensioenfonds Bouwnjverheid plan for construction workers, Amsterdam and Stichting Pensioenfonds voor de Woningcorporaties, the €4.5 Billion Huzien-based pension plan for housing corporatins has teamed up with life settlements provider Legacy Benefits Corp., New York.
Cordares expects clients to invest up to €100 million in to the new fund. The fund will be bassoon on a broad pool of U.S. life settlements with conservative life expectancy estimates and will have an expected annual net return of around 8%.
Mr Tielman of Cordares considers this a fairly conservative return for the asset class and said the investment fund is designed to give investors their first taste of life settlements rather than trying to squeeze put every last ounce of alpha. But recent strong demand from investment banks for the life settlements has pushed up process and could resduce short term yields. This short term buying could scare off long term investors who are just starting to express an interesting the asset class, he warned.
The pension plan executives he has spoken with view life settlements as an attractive investment because of the low correlation to the other asset classes. “It’s a relatively new and illiquid asset class, so there could be some excess returns, and it has long-term diversifying benefits,” he added.
Tags: life settlements, securitized life insurance policies