An income producing asset class with the potential to pay up to nine per cent a year has been launched in the UK.
The Secured Life Fund, designed for large pension fund and institutional investors, is constructed to produce regular cash flows without the volatility of stock markets or other traditional benchmarks.
Investors into the fund will be able to choose from either a five, seven or ten year investment period, each of which will provide fixed returns paid annually in arrears. Returns range from eight per cent for the five year bond, 8.5 per cent over seven years, rising to nine per cent for the ten year bond.
Income is generated by investing in a combination of cash, cash equivalent assets and principally through the repayment of loans collateralised by US life insurance policies.
The minimum investment is currently EUR250,000, but there are plans to roll out the fund for smaller sum investments via a UK plan manager.
“The Secured Life Fund is a new concept for UK institutional investors, but has worked extremely well in the US, where the asset class was pioneered,” says finance director Andrew Walters. “A major attraction for the ‘big ticket’ institutional investors is the fact that they can enjoy stable and consistent returns which currently outgun most other asset classes. Given the continuing muted returns from equities and other income producing vehicles such as corporate bonds and gilts, our product is perfectly suited to major investors wanting certainty of returns over given periods.”
The Secured Life Fund effectively gives a cash resource to allow the facilitation of selected loans to terminally ill US cancer patients and their families.
It allows them to borrow against the maturity value of their qualifying life insurance policies at reasonable rates, via a loan product.
The product is both financially and medically underwritten using conservative criteria, and is collateralised by the underlying highest investment grade life insurance policies.
The fund defines a potential borrower as “terminal” if his or her life expectancy is five years or less.
Loans will be made typically to US cancer sufferers who have been medically diagnosed as being “beyond treat-to-cure” and who are in need of cash to meet medical and living expenses for their remaining time.
