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Sweet surrender

The EEA life settlements fund has risen for 26 consecutive months. It is a low-risk uncorrelated investment solution which aims to return 8 per cent each year.

In 2006, it went up by over 10.5 per cent and in 2007 by around 8.7 per cent and has continued its upward trend this year.

The fund invests in a portfolio of US life settlements which are life insurance policies where the insured has an impaired life expectancy. The fund buys these policies for an amount in excess of the cash surrender value.

It pays all future premiums during the remaining life of the assured but collects the full face value of the policy on death or maturity.

As the surrender values offered by life companies in the US are generally poor, the original policyholder can achieve substantially more by selling the policy to the secondary market. The fund size is now $87m and 115 policies are held by the fund, averaging about $980,000 each.

The estimated average life expectancy is 32 months and the number of policies matured so far is 13 per cent of policies purchased.

The specialist adviser to the fund is ViaSource Funding Group which is backed by GE Capital.

Before it buys policies, it obtains two independent life expectancy reports and then its own medical team analyses and reviews these to decide what valuation to put on each policy.

The value of the policies purchased by the life settlement’s industry is estimated at over $10bn a year in the US.

This fund is an ideal investment for all pension policies and has proved very popular in the UK over the past year.

I strongly recommend it as it is lower risk than bond funds and likely to be more profitable.

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