Managing Partners Limited (MPL), the fund management group, has appointed Milliman, one of the world’s largest independent actuarial and consulting firms, to provide valuations in Traded Policies Limited, its open-ended investment company that invests in traded life policies (TLPs). 

The appointment is likely to increase performance in the fund by as much as 1.5% per annum, taking the performance in the sterling share class  10% over the next 12 months. The appointment follows a significant increase in assets under management in the fund over the year to date from $45 million to $65 million. Much of this demand has been from pension funds looking to match their future liabilities with assets that deliver steady returns. 

Jeremy Leach, MPL’s Managing Director commented “The reason we elected to appoint Milliman is because of the depth of their experience in the US traded policy market who have been involved at a institutional level for many years, during which time the data they have collated has been invaluable when establishing a robust valuation model.” 

He added, “Milliman brings an enormous amount of experience as a resource to our business and as one of the largest actuarial firms in the world (with over 2,000 qualified professionals), we expect to able to increase are institutional business levels as a result of this strategic alignment.” 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 $10bn in 2006.  

While TLPs carry the risk that it is unknown when the lives assured will die, the key attraction of a TLP fund is that with the right diversification and actuarial analysis, they can be used to deliver steady, predictable returns. Because of this high degree of certainty and their solid underlying value, it is possible for products that invest in them to secure a substantial degree of gearing to enhance returns and initial allocation rates. This is particularly attractive to UK investors in countering the surrender penalties imposed for pulling out of with profit funds. 

Jeremy Leach, managing director of MPL, commented: “Until now our actuarial adviser has taken a particularly cautious stance in valuing our portfolio of traded life policies because of the risk of factoring in profit too quickly and causing poor performance in future years. Our objective as a manager however is to be as accurate as we can possibly be in valuing the portfolio and because Milliman has been integrally involved with the traded policy market in the USA for over 20 years, the breadth of data and knowledge permit us to be more accurate in valuing the fund. We are also attracting a lot of institutional money and the fund has reached such a large size we took the view that a bigger brand name would deliver greater confidence in our valuation model.” 

Traded Policies Limited 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.  

The institutional US dollar share class has significantly outperformed its benchmark and cash since its launch. The share class 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 $65m 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, demonstrating the potential of traded life policies (TLPs), in which the fund invests, to deliver consistent, incremental growth. 

Top five holdings in the fund include TLPs from John Hancock Life Insurance Company (10%), Lincoln National Life (10%), American General Life Insurance Company (7%), Minnesota Mutual Life Insurance Company (6%) and Security Life of Denver Insurance Company (5%). 

This entry was posted on Wednesday, September 19th, 2007 at 12:17 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.