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201407 London Alt Assets Life Settlements
An intense Alt Assets LP summit took place in
London on the 3rd and 4th June 2014.
The summit was well attended, with many leading General Partners,
Limited Partners and investors represented - including SL
Investment Management (SL).
The range of agenda items was vast; but all with the overriding
theme and focus on the past, present and future of the private
equity (PE) industry. The general sentiment was that the PE market
has suffered greatly since the financial crisis; but is now in an
up-cycle with the future looking bright.
Ioan Roberts, SL's Life Settlement Trading Manager attended the
"PE and life settlement investments have a great deal in common.
They are both illiquid alternative investments that can offer
higher returns relative to traditional asset classes. Historically
the biggest investors in both asset classes have been the large
banks. However, they are now subjected to the stringent capital
adequacy requirements imposed by the Solvency II directive and the
Basel III reforms."
"This enforced deleveraging has caused a shift in their
allocations to more liquid investments, leading to a fall in demand
for both life settlements and PE investments in the aftermath of
the financial crisis."
In recent months, SL has noticed increased activity in the life
settlement market - and this is a welcome development that is
echoed within the PE industry. With equity markets reaching a
plateau and interest rates still low, pension funds in particular
are increasingly looking for investments that can offer higher
returns as they seek to match the rise in their liabilities
resulting from the baby boomer generation reaching retirement
The PE market has also benefitted from a growth in insurance
company investment, whilst SL has witnessed more activity from PE
houses themselves investing heavily into life settlements.
Another similarity is that assets within a PE and life
settlement investment often present challenges for managers in
terms of reporting an objective and fair value for assets -
certainly more so than with traditional investments. This is an
issue that the introduction of the Alternative Investments Fund
Management Directive (AIFMD) goes some way to addressing, requiring
the valuation processes to be functionally independent from
portfolio management. Managers in both asset classes have been
striving to comply with these new rules before the Directive's July
Ioan Roberts continued, "SL has an impressive pedigree in the
provision of specialist asset valuation services
to portfolios of alternative assets, particularlyUK with-profit and
longevity based assets. Alternative Investment Managers seeking
independent valuation services for bespoke assets are encouraged to
come and talk to SL and our actuarial team to see how we can
In conclusion - both life settlements and PE have suffered from
negative public perception over recent years. Despite this,
great strides have been taken to improve the regulatory regime
governing these types of asset; and to improve transparency - which
can go some way to creating a more open and competitive market.
SL believes that this is an important step in regaining investor
confidence in the healthy functioning of the market. SL anticipates
increased interest in the alternative assets space in the near
future, particularly as investors look at options to create
enhanced yield, beyond that perhaps currently offered by more