Endowment policy funds are pooled in to life insurance companies
with-profits funds which often invest in a range of assets
including overseas equities, fixed interest securities, property,
alternative investments and cash.
TEP Investments are characterised by:
• attractive returns following discounted asset
• significant capital guarantees which provide unique
• low volatility owing to 'smoothing' and a balanced
underlying investment portfolio
However, secondary life asset performance is largely dependent
on the skill and experience of the fund manager/adviser and,
selecting the right partner is critical. In-depth due diligence in
the asset selection process is therefore essential, and the key
consideration for any Traded Endowment Policy investor should
include an assessment of the Fund Manager.
Some key aspects to consider when selecting a TEP Fund Manager
• Experience and Capability: Desirable
characteristics include time in market, significant operational
capability, in-house expertise, and a dedicated actuarial
• Transparency: An absolute necessity to
identifying conflicts of interest. All interests should be aligned
to delivering performance for the shareholder.
• Valuation Methodology: Not all
valuation methodologies are created equal. Most valuation methods
use mark-to-model therefore can differ greatly. It is crucial that
the investor understands the relationship between true value of
assets and the share price.
• Pricing Methodology: Understanding
pricing methodologies at point of purchase is vital. As with
valuation, not all pricing methodologies are created equal.
• Actuarial Input: Policy selection
should be guided by an actuarial model designed to build a
portfolio with shareholder objectives in mind. Output from the
model should include policy criteria to ensure only appropriate
policies are acquired.
If you would like to learn more about the attractive investment
opportunities in TEPs, or have any questions, please contact Alec
Taylor, Head of TEP Investments:
T: +44 (0)1244 317999