Life settlements are US-issued life insurance policies that have been sold by the original owner at a discount on their future maturity value and are institutionally traded through a secondary market.
MPG said its research showed that 94 per cent of Swiss asset managers would now consider investing in life settlements.
Life settlements are attracting large institutions and service providers including Apollo Global Management, GWG Life, Vida Capital, Broad River Asset Management, Red Bird Capital Partners, Partner Re, SCOR, Berkshire Hathaway, Coventry First, Wells Fargo, Bank of Utah, Wilmington Trust and Credit Suisse Life Settlements LLC.
Wealth managers agree that markets are looking overcooked. Ahmet Feridun, investment director at Cazenove Capital, wrote in May: “We are now in the unusual situation of global equities, bonds and credit all trading at some of the highest levels ever. What makes this period of expensive valuations particularly unusual is that it coincides with low levels of economic activity. This suggests that investors are pricing a lot of future growth into today's valuations.”
“It would be hard to make the case for valuations rising much higher from current levels. There is a risk that the anticipated recovery fails to materialise - perhaps due to new variants of the virus. In this case, much of the future growth priced into equity markets could quickly unwind. There is also a possibility that policymakers have overstimulated the economy, creating too much inflation and forcing them to withdraw the safety net of low interest rates and asset purchases those investors have come to rely on. The recent rise in bond yields is evidence that the market is assigning an increasing probability to this outcome,” he said.
If Tesla – the electric carmaker – is taken out of the numbers, US stocks have actually drifted lower, Feridun said, suggesting that valuations are more sustainable than they may appear at first glance.
Edison, the investment research, investor relations and consulting firm, said in a note on 20 June: “We believe investors are aware of their limited investment choices at present. Low bond yields, low corporate credit spreads and the anticipation of an extended period of accommodative monetary policy into 2022 are in our view the primary driver of relatively high equity valuations – and it is not necessarily irrational.”
(On a separate theme, this news service has been covering developments in the Swiss market for external asset managers. See here for regulatory developments.)