MPG: Life Settlements will attract more new investors

February 21, 2024

Majority of investors seem to believe more wealth managers, pension schemes and other professional investors will invest in Life Settlements for the first time.

Two out of three professional investors (64%) predict investment in funds focusing on Life Settlements will rise over the next five years, concludes MPG (Managing Partners Group) from its survey of global institutional investors and wealth managers holding assets of €107 billion under management commissioned.

‘Demand for the asset class is being driven by life settlement fund performance - fund managers specialising in life settlements have consistently generated high single digit annual returns and current market pricing delivers an annualised yield of 12%,’ says MPG.

‘However, the sector is also being driven by rising numbers of life insurance policyholders choosing to sell their policies at a discount to their maturity value, yet higher than the surrender value, creating an increasing supply of Life Settlements that are institutionally traded through a highly regulated secondary market.

Around 86% of investors surveyed believe more wealth managers, pension schemes and other professional investors will invest in the asset class for the first time as a result. Just under one in ten (8%) say they do not expect more first-time investors in Life Settlements, while 6% were unsure.

The main reason for the rise in number of life insurance policyholders cashing in policies identified by the research is the rising cost of long-term care in the US followed by the increasing ageing population.

The rising cost of living and increasing financial pressure on consumers was cited as the next most likely reason followed by a growing awareness among policyholders that they can sell their life insurance policies.

Growing awareness of the possibility of cashing in policies is being driven by more Life Settlement  providers advertising the fact that customers cashing in policies will receive a higher pay out than if they just surrender them, the study found.’