August market turmoil no hurdle to traded life settlements funds

EEA Fund Management has just reported that its Life Settlements Fund had another month of steady returns in July, and that August should show the same again despite the volatility hitting markets for assets such as equities, bonds and currency.

The underlying assets in the Life Settlements Fund are US life insurance contracts, and there has been no sudden change in the average life expectancies of the insured. This makes the performance of the fund highly uncorrelated to other traditional assets, and means the managers expect a consistent return over time.

Returns in July were 0.63% for both the dollar and euro share classes. Year to date returns to the end of July are 4.96% and 4.82% respectively.

Annualised returns for these share classes since inception are 8.87% and 7.54% respectively, although newer share classes, such as the SEK are doing slightly better at 9.08%, according to data provided by EEA.

Peter Winders, EEA marketing director, said: “Our experience since the EEA Life Settlements Fund was launched in 2005 is that market volatility does not seem to have a huge impact on inflows, though we are pleased to say the fund continues to steadily grow. Flows have been remarkably consistent since launch, increasingly from a few million [sterling] a month shortly after launch in 2005 to some £30m a month on average a few years later.”

“August can often be a quiet month for flows into other asset classes – though that does not necessarily mean it is quiet in markets, as the recent volatility has shown. However, flows do not tend to dip for us over the summer and in fact August 2008 was a record month for us, topped only by August 2009, so at EEA we don’t tend to take our holidays at this time.

“From a European perspective, interest from investors in the fund has increased since David Furlong joined in March as head of European Sales. He has been particularly successful in Scandinavia, a key region for us, and the introduction of a Swedish kroner share class has also helped attract investors. David has significantly expanded our contact base in Europe and we hope to see greater numbers of our investors coming from across the continent.

“This month’s volatility will no doubt sharpen the focus of investors who are looking for non-correlated absolute return strategies, a category that perfectly describes the EEA Life Settlements Fund. And while we do not go chasing so-called ‘hot money’, more and more investors are recognising the benefits that a fund like ours offers.”

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