Press Releases

20 February 2007
EEA Fund Management finds value in untapped asset class.

Investing in life policies provides portfolio diversification as an uncorrelated asset class:

Investing in life policies is not the most obvious investment opportunity for your average fund manager, however, EEA Asset Management is not your average fund management company. After completing an MBO from EPIC Specialist Investments Limited a year ago and with three years outperformance with the two UK OEICS, CF Epic Insurance and General Fund and the CF EPIC UK Equity fund under their belts, this is an investment boutique going from strength to strength.

The EEA Life Settlements Fund, a socially responsible fund, launched in November 2005, does exactly what it says – invests in life insurance policies from US citizens with the fund benefiting on the maturity of these policies. Based in Guernsey, the fund uses US laws to invest in life policies that have been volunteered for surrender. Once the life insurance policy is sold, the new owner pays all future premiums and will then collect the full face value of the policy on maturity.

Through its listing on the Guernsey Stock Exchange, the fund is fully open to SIPP investors in the UK.

In most cases, a policyholder who needs to surrender their policy for whatever reason can achieve a much better value by selling their policy than surrendering it to the life office. Parties may sell for various reasons, the most common being: unaffordable level of premiums, estate planning reasons, funding medical expenses or treatments or simply to live out ones final years in a certain amount of dignity and comfort.

EEA Fund Management works closely with ViaSource, a US-based specialist in the life settlements market. They outsource underwriting to two specialist firms who underwrite the life expectancy of each policy and employ their own medical staff to track the progress of the life assured to assist new treatment and drugs. In one real-life case recently, an 88 year-old man who wished to surrender his policy with a face value of $2.6m, was offered a surrender value from his insurer of just $57,000. ViaSource bought the policy and handed the policy holder nearly $850,000 in return. An estimated $1 Trillion worth of policies lapse without any value to policyholders each year in the US.

Though EEA is not the only such investor in the market, they are the only investors that use a financial model as opposed to an actuarial model to purchase and value policies. Whilst actuarial models will use a broader spectrum taking into account general demographics, financial models are based on individual circumstances and have proved far more accurate to date. Last year, the fund returned in excess of 10% net of charges.

Christopher Daly, Chief Financial Officer of ViaSource Funding Group, said:

“Life Settlements are a largely unknown asset class and returns last year were well above cash. This is a relatively new concept in investing but one we feel will grow in popularity as the asset class is totally uncorrelated to equities or bonds. We examine the policies thoroughly with our in-house medical team and it has served us well to date. Some may question the moral issue in buying life policies, however, this is a socially responsible fund. These are policies that are volunteered to us, in return we offer a substantially better return than they would otherwise get from the product provider to help pay for essential treatment or to help live out their life in comparative comfort.”

John Buttress, EEA Life Settlements Fund, said:

“The investment objective of the fund is to provide investors with a benchmark net return of 8% per annum on a stable long-term basis. Above that level we aim to target total net returns of between 9% to 10% per annum. Last year the fund returned in excess of its top end target level on the basis of ‘real’ performance i.e. policy maturities.”