15th May 2023

Nine out of Ten Professional Investors Expect to See Growth in Life Settlement Market

  • 95% of professional investors expect the number of Life Settlement policies available to invest to rise.
  • Nearly two out of five expect dramatic growth as pension funds and wealth managers start to invest in the sector, new research shows.
  • Strong annual returns are driving growing interest in High Protection Fund.

Professional investors are increasingly targeting Life Settlements as a major growth sector in the alternative assets space as more pension funds and wealth managers start to invest, according to new research, the findings of which have been published in a new report published in a New Report publish by MPG.

Almost all 95% investors questioned believe the expected growth in the number of Life Settlement policies available to invest in will mean more pension funds and wealth managers will invest in Life Settlements for the first time.

Nine out of ten of professional investors expect to see the Life Settlement market grow over the next five years with almost two out of five (36%) professional investors expecting dramatic growth during the same period.

MPGs research with wealth managers and institutional investors who are collectively responsible for £258 billion assets under management found.

Life Settlements are US-issued life insurance policies that have been sold by the original owner at a discount to their future maturity value. They have little or no correlation to equites and bonds.

Data shows that between 2021 and 2022 around $8.5 billion was paid out to life insurance policyholders who sold to Life Settlement funds but the annual gross market potential capacity for Life Settlements is estimated to be a large as $220 billion highlighting the possible expansion of the sector.

The study among a large number of professional investors across Switzerland, Germany, Italy, the UK and the US outlined further factors behind the growth of the sector with the ongoing rise in the cost of living seen as the major driver for policyholders wanting to cash in early.

The research for MPG, which manages the High Protection Fund investing in Life Settlements, also identified growing awareness among policyholders of the option to sell their policy for a cash sum that is in excess of the policy’s surrender value, that could be used to improve lifestyle in old age and/or fund the rising costs of long-term care. As the aging population continues to grow it is expected to generate an increasing potential supply of Life Settlements, which was seen as another positive factor.

Nearly nine out of 10 (88%) investors that were questioned, believe Life Settlement providers will increasingly advertise the benefits of selling the future benefits of their policies rather than surrendering them in. Nearly half (48%) expect the annual gross market potential for Life Settlements will beat estimates of $220 billion and exceed $250 billion.

MPG’s High Protection Fund is seeing strong demand for Life Settlement investments as a growing part of the alternative assets sector. It delivered net annualised returns of 9.27% in 2022 and attracted net inflows of $20 million. The High Protection Fund has returned 296.91% since it was launched in July 2009. It aims to achieve smooth predictable investment returns of between 8% and 9% per annum, net of fees.

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