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MPL Recommends Alternative To Bonds and Equities as Instability Hits Financial Markets

Managing Partners News
May 6th, 2007

Traded life policies offer steady, incremental returns. 

IFAs and managers of institutional and pension portfolios with concerns over recent stockmarket volatility and weakening bonds need to consider the burgeoning asset class, traded life policies, according to Managing Partners Limited (MPL), the fund management group.

Rising interest rates and concerns over the

US sub-prime market have impacted bond markets negatively, while concerns are mounting over a correction in equities, which have seen increased volatility over the last week. MPL says TLPs are a good alternative for those seeking a safe haven investment offering steady, incremental and predictable returns.

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.  Funds that invest in TLPs are low risk because the investor has a good understanding of how much profit will be made from each policy in the fund. With careful actuarial analysis and diversification of policies, it is possible to predict returns with a high degree of accuracy.

Jeremy Leach, managing Director at MPL, commented: “Rising interest rates mean it is time for portfolio managers to review their selections to find assets that will sustain relative yield.

“The bull run in equities will probably continue for a while because

China now permits domestic assets to be invested overseas to ease the pressure on its own overpriced market, but it is widely expected that a correction will occur. Meanwhile, the bond market has been weakened by worries over sub-prime mortgages in the

US.

“Investors should look at TLPs, which are currently benefiting from high yield levels of around 8-10% at present. UK investors can also profit from hedging the dollar and sterling: each time

UK interest rates rise, the portfolio will rise proportionately because of the interest rate differential between sterling and the dollar. This can only be achieved by an experienced investment manager and a large portfolio of assets.”

The TLP market has been gaining popularity among pension funds this year, thanks to their low risk and potential for steady, high growth. For example, the US dollar institutional share class in Traded Policies Limited, an open-ended investment company managed by MPL,  returned 28.35% in the three years to 1 July, 2007, significantly outperforming its benchmark, the 10-Year US Government Bond Index, which returned 8.54% over the period, and the Fed Funds Effective Rate, which returned 12.768%.* The $60m fund’s return represents an annualised return of 8.78%, net of all charges. The fund did not suffer a single negative return in any quarter during that period

The Traded Policies Limited fund is available in sterling, euros and US dollars and targets an annual return of 9% per annum, net of all charges. Institutional share classes in euro and sterling were launched 31 July 2005. A retail share class was launched in March this year, allowing investments from wrap providers and insurance companies.

For retail investors, MPL also offers the Corinthian Growth Fund. The fund is a fully-regulated

Cayman Islands mutual fund that can be included in personal portfolio bonds, wraps and SIPPs. A popular feature of the fund is its 2X-leverage facility, enabling returns to be enhanced. The fund has no initial charge and a 103% allocation rate. The annual management charge is 1%. It has a 7-9% annual growth target net of all charges.

This entry was posted on Sunday, May 6th, 2007 at 12:14 pm and is filed under Managing Partners News. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.