A new asset class investing in secondhand US whole-of-life policies could be a replacement for with profits funds, says a US provider.
Secured Assurance Marketing is launching the UK's first sterling share class for traded life policies which it claims will bring at least around an 8 per cent return each year.
SAM has exclusive UK distribution rights in a partnership with the Assured Fund, the fund of traded life policies.
The firm argues that policies have long been accepted as a meaningful and viable investment vehicle. US brokers buy life insurance policies off US citizens and then sell them into a fund. This results in the fund buying a deeply discounted asset against a known event – the death of the policyholder.
The existing valuation model regularly provides annualised dollar returns of around 8 per cent. But Secured Assurance says that by hedging this into sterling returns can increase by another 2.5 per cent.
It claims that the fund would appeal to advisers because it is sterling denominated, uncorrelated to other asset classes, has a diversification of risk and is ethical.
Secured Assurance Marketing marketing director Graham Hooper says: “I do believe that these could be seen as a replacement for a with-profits bond. They are at the lower end of the risk scale.
“In the context of the current problems for UK savers of rising interest rates, flat stockmarkets and questions over the property market mean that savers and investors need an alternative form of investment.
“This is a new asset class. The range of options out there to IFAs have become limited as they look for ways of getting the low-risk return their client wants. This is a new option for them.”