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Life Settlements - a non-correlated, alternative asset. A policyholder sells their life insurance policy to a third-party investor for cash.

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Long Term Value

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A Dedicated Team

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Alternative Investment Industry

The alternative investment industry is the sector of the financial system that deals with assets that are not stocks, bonds, or cash.

These assets include private equity, hedge funds, real estate, commodities, collectibles, and others.

The alternative investment industry offers investors the opportunity to diversify their portfolios, enhance their returns, and hedge against inflation and market risks.

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Alternative Investments vs. Traditional Investments

The most important thing to keep in mind is portfolio diversification.

When choosing investment alternatives, why is it wise to diversify? The answer is simple: diversification increases returns while decreasing risk.

It’s also important to keep in mind that you probably won’t be replacing traditional investments with alternative ones, but rather adding in order to create this diversification.

After all, there are certainly advantages and disadvantages of alternative investments, so including a wide range of investments may help mitigate risks while maximizing returns.

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Our View on Alternative Investments

Frequently Asked Questions

How do I invest

To invest in life settlements, you need to meet certain criteria, such as being an accredited or qualified investor, having a minimum investment amount. There are different ways to invest in life settlements, such as:

  • Direct purchases of life insurance policies: Buy life insurance policies directly from sellers to become the sole owner and beneficiary. Pay future premiums and collect death benefits. You may gain high potential returns, but with upfront costs, risk exposure and illiquidity.
  • Indirect purchases of life insurance policies: Buy shares or units of a fund or a trust that invests in life insurance policies. Pay management fees and expenses and receive periodic distributions. You may gain diversification and liquidity, but with lower returns and less control.
  • Fractional purchases of life insurance policies: Buy a portion of a life insurance policy from a life settlement provider or broker. Share the premium payments and the death benefits with other investors. You may gain access and affordability, but with complexity and uncertainty.

What are the major risks

  • Longevity risk: The risk that the insured person lives longer than expected, reducing the return on investment for the buyer who has to pay more premiums and wait longer for the death benefit.
  • Liquidity risk: The risk that the life settlement contract is difficult to sell or exit, limiting the flexibility and accessibility of the investor who may need cash for other purposes.
  • Valuation risk: The risk that the life settlement contract is overpriced or underpriced, affecting the profitability and attractiveness of the investment.
  • Credit risk: The risk that the life insurance company that issued the policy becomes insolvent or unable to pay the death benefit, resulting in a loss for the investor.

How are the policies procured

Life settlement policies are procured by life settlement providers or brokers who act as intermediaries between policy sellers and buyers. The process involves four steps:
  • Applying and underwriting: The policy seller submits an application and provides information about their policy, health, and life expectancy. The provider or broker evaluates the policy and determines its market value.
  • Researching buyers and receiving an offer: The provider or broker solicits bids from potential buyers, such as institutional investors, hedge funds, or banks. The policy seller receives the highest offer and decides whether to accept it or not.
  • Closing the sale and receiving payments: The policy seller signs a contract and transfers the ownership and beneficiary rights of the policy to the buyer. The provider or broker handles the legal and administrative paperwork and pays the seller a lump sum of cash.
  • Receiving the death benefit: The buyer continues to pay the premiums of the policy and collects the death benefit when the policy seller dies.

Why should I invest

  • Low correlation: Life settlements are not affected by the performance of the stock market, the interest rates, or the economy. They depend only on the mortality of the insured persons, which is relatively predictable and stable. This can help reduce the volatility and risk of a portfolio.
  • High returns: Life settlements can offer higher returns than other fixed income investments, such as bonds or annuities. The returns are based on the difference between the purchase price of the policy and the death benefit, minus the premiums and fees. The returns can range from high single digits to low double digits, depending on the life expectancy of the insured persons.
  • Inflation protection: Life settlements can help preserve the purchasing power of money in times of rising inflation, as the death benefit of the policy is usually fixed and does not lose value over time. The premiums of the policy may also be fixed or increase at a lower rate than inflation.

However, life settlements are complex and uncertain investments that require careful due diligence and professional guidance. They are usually only accessible to sophisticated and accredited investors who can afford and understand the risks involved.

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