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Life Settlements Wholesale Fund

Money at Work: This week we look at the Life Settlements Wholesale Fund

Monday, 1 October 2007
What is it called and what sort of investment product is it?
The Life Settlements Wholesale Fund is structured as an Australian unit trust.

Who is the company behind it?
Life Settlements Funds is an Australian-based firm, however, it is also part-owned by two US companies.

Who is the target market?
Investors looking for long-term capital growth, combined with some income along the way, that is uncorrelated to other investment markets.

What return does it offer?
No rate of return is guaranteed. In the last financial year the fund returned 18.77% in $US terms but because of currency fluctuations the $A units grew by 6.44%.

When was it launched?
The fund launched just over 18 months ago but has raised over $600 million since from investors in New Zealand, Australia and 10 other countries.

What other products is it like or is it competing with?
The Life Settlements fund is currently the only one of its kind in the Australasian market.

Is it long term, short term or medium term?
This is a medium- to long-term investment. Recommended investment period is at least five years.

What is the unique selling point?
The fund aims to make money by buying the unwanted life insurance policies of wealthy Americans at a significant discount. The fund will only buy policies from those aged over 65 with a life expectancy of 10 years or less. Because of the unique legal structure of the US insurance market the fund is guaranteed the face value of the death benefit as long as it has paid the premiums.

How strong a stomach do you need for it?
The fund has been rated AA- by Australian research firm PIR. It is marketed as a low-risk capital stable product. There is also a high degree of liquidity - ie it is easy for investors to redeem their units.

What's the hitch? Because this is such a relatively new product the risks may not be well understood by investors. The greatest short-term risk for NZ investors is currency fluctuations. Longer term the fund could also be affected by events in the US life insurance market.

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