A report by Professor Merlin Stone of the Bristol Business School into the traded life policy market and the opportunities for investors is now available to institutional investors for free.  The fund manager Managing Partners Limited, who commissioned the report, has made the report available on its website at www.managing-partners.com  and a printed version is available upon request. 

The traded life policy market is witnessing strong growth and Professor Stone believes that there will be a huge surge of money from institutional investors into funds investing in this asset class.  TLPs are US-issued, whole of life assurance policies sold before the maturity date to allow the original owner to enjoy some of the benefits during their lifetime. 

Professor Stone identified a number of attractions from investing in TLP funds including lower risk than other asset classes; a greater choice of policies for fund managers to choose from which should have a beneficial impact on performance; improved assessment of life expectancy estimates and low correlation with other asset classes.    However, in reviewing the TLP market, he also identified a number of risks that investors need to be aware of.  These include the risk of poor mortality estimates, which are particularly evident on longer term policies although strangely they still remain favoured by a minority of TLP fund managers even though it is an accepted fact that the longer the life expectancy, the more likely it is that inaccuracy will occur.  

Jeremy Leach, Managing Director for MPL commented; “our actuarial advisers are particularly wary of longer term policies as we have no idea what advances in medical science will occur over the next two decades but it is clear that mortality levels continue to rise and longer policies therefore create a substantial increase in risk. We have therefore maintained a cautious stance and limited our purchase criteria to select polices within a three to nine year band so that the average mortality expectation is sustained at between five and six years”.

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