Fund manager Managing Partners Limited says that a combination of strong returns from funds investing in traded life policies (TLPs) and stock market volatility have resulted in a huge increase in the amount of money retail investors have invested in TLP funds.  

 It estimates that on 1^st November 2006, retail investors had around $48.58 million invested in five of the top TLP funds, but 12 months later this had reached $101.3 million – a rise of $52.72 million.  

TLPs are United States-issued life assurance policies sold before the maturity date to allow the original owner to enjoy some of the benefits during their lifetime.  TLPs are purchased at a discount from their maturity value, which in the majority of cases is fixed at outset, which means that they are guaranteed to rise in value. The TLP market has seen huge growth from $50m in 1990 to well over $20bn now.  

MPL says that while TLPs carry the risk that it there is no guarantee when the lives assured will die, many institutional investors have been attracted by the fact that with comprehensive actuarial analysis and policy diversification, TLP funds can deliver steady, predictable returns. Because of this high degree of certainty and their solid underlying value, it is possible for those that invest in them to secure a substantial degree of gearing to enhance returns and initial allocation rates. Funds that invest in TLPs also offer strong diversification benefits in that they have a very low correlation with equities or bonds.Jeremy Leach Managing Director of MPL, commented:  “With the current stock market volatility institutional investors have increasingly been looking at alternative asset classes that can deliver smooth attractive returns.   TLPs provide just this, which institutional investors and pension fund managers are increasingly becoming aware of.  For example, our Sterling Growth Class (the retail share class) of Traded Policies Fund has delivered annualised returns of 9.54% since its launch in March 2007”

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