Shepherds Investment is offering UK investors a chance to invest in US traded life policies.
Traded life policies are life insurance policies sold by policyholders who want to benefit from the value of the policy while they are still alive.
The policies are sold at a discount to their maturity value which provides the profit for investors. Unlike traded endowment policies, the return from TLPs is known at the outset. The uncertainty comes from not knowing when they will mature, as this depends on the policyholder's death.
The Shepherds select high security fund invests mainly in TLPs, although it may have some exposure to TEPs. The fund has three share classes for retail investors - growth, income and guaranteed. The income share class aims to provide 9 per cent growth a year, which will include quarterly income payments of 1.5 per cent. The growth share class also aims for 9 per cent growth, while the guaranteed share class aims for 7 per cent a year within 12 months of the policy's maturity date.
One risk of investing in this fund is that the original policyholders may live longer than expected so investors will have a longer wait for their returns. However, medical opinions and an actuarial model are used to make judgements about life expectancy as accurate as possible.
Also, the guaranteed share class ensures that a policy is paid out within 12 months of the anticipated maturity date, minimising the impact of people living longer than expected. However, the returns on the guaranteed share class are slightly lower than the other share classes.
Some investors may feel it is unethical to invest in a fund which profits from death. However, Shepherds points out that in the US, where there is no equivalent to the NHS, TLPs can be a solution for people to live the remainder of their lives comfortably.