Found these tips from Wm. Scott Page. These tips are directed to those looking to potentially invest or purchase life settlement portfolios.
- Beware of adverse selection. The seller of the portfolio may keep the best performing policies and only sell the weaker ones. Risk gets passed to the buyer.
- Understand origination concerns. Aside from insurable interest, issues regarding transparency, trust agreements and corporate documents can arise.
- Differences in documentation and tracking can be significant. Lack of uniformity in documentation hinders policy evaluation, and tracking varies greatly from company to company.
- “As is” portfolios offer challenges. Some portfolios today are being offered “as is” and include policies that a manager would otherwise not purchase.
With the amount of premium financed policies and insurable interest policies created and sold in the last 3 years, buyers and investors need to beaware of these policies lowering the value of the portfolio.
Excellent advice from a reputable professional in the industry. “Build or Buy”, i.e. ramp up a portfolio or buy an existing fund are two different entry strategies for investors. ISLSP has recently held three free webinars with industry experts highlighting what institutional investors need to be aware of, including updated information on taxation. Recent investor meetings in the States and in Europe prooved that investors willing to deploy capital are more open to invest in well structured open ended LS funds. ISLSP is currently performing a global study on more than 30 ls funds. We provide indipendent non commercial advice through our international network of professionals.