Even a cut of 1 per cent in US interest rates will be insufficient to resolve the crisis in the US sub-prime mortgage market and dampen the resulting turbulence affecting equities and fixe
Even a cut of 1 per cent in US interest rates will be insufficient to resolve the crisis in the US sub-prime mortgage market and dampen the resulting turbulence affecting equities and fixed-income investments, according to Jeremy Leach, managing director of Managing Partners, which specialises in traded life policy investments.
‘We expect there to be a rate cut in the US relatively soon, but we believe that even a one per cent reduction in rates will be too little, too late to resolve the problems in the sub-prime mortgage market.
‘Equity market turbulence is likely to continue for some time, and we believe the short-term rally in bonds will also see a correction, as it is only supply and demand that is pushing prices up, not the value of the asset. Equities, bonds and property are all under pressure to perform, but it’s likely there will be continued volatility in these markets.’
Leach argues that investors should ‘run for cover’ by identifying asset classes that are not impacted by the global market turbulence. ‘For investors looking for a safe haven, traded life policies offer an interesting alternative,’ he says. ‘They offer steady, incremental and predictable returns, and are currently benefiting from high yield levels of between 8 and 10 per cent.’
Managing Partners deals in US-issued life assurance policies sold before the maturity date to allow the original owner to enjoy some of the benefits during their lifetime. Funds that invest in such policies are low risk, Leach says, because the investor has a good understanding of how much profit will be made from each policy in the fund. With careful actuarial analysis and diversification of policies, it is possible to predict returns with a high degree of accuracy.
Managing Partners specialises in managing alternative asset classes for institutions and sophisticated investors, and a leader in managing funds that invest in traded policies. The firm manages various Cayman-domiciled collective investment schemes and regulated mutual funds with total assets of more than USD100m.