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'Rogue' TLP providers rebuked
Several providers of traded life policy (TLP) investments have hit out at competitors who have "deliberately deceived the market".
The comments follow a speech by Peter Smith, head of investments policy at the FSA, to the European Life Settlement Association (Elsa), in which he set out the FSA's view on the TLP sector and warned providers to improve the information given to intermediaries so only "sophisticated investors" put their money into the asset class.
Mr Smith laid out the FSA's view on the TLP sector, warning providers to improve the information given to intermediaries to ensure only "sophisticated investors" put their money into the asset class.
Mark Hindle, investment director at Policy Selection and manager of its TLP-backed Assured fund, said it was "frustrating" the industry had been forced to defend itself against the actions of "a few rogues", at a time when the asset class had been performing strongly compared with most other sectors.
He said: "The headline failures in this industry are precipitated by a few who, with all consciousness, have deliberately deceived the market.
"Peter Smith recognised that, if there is sufficient diversification in the portfolio and the actuarial calculations are accurate, the returns from the asset will demonstrate low volatility in performance, which is one of the true selling points of this asset."
In his speech, Mr Smith also emphasised the importance of accurate valuations, citing the example of the Shepherds Select fund, the first UK fund to invest in TLPs, which collapsed in May 2005, leaving investors facing losses of around £22m.
Jeremy Brettell, chief executive of SL Investment Management, echoed the FSA's concerns, accusing some of his company's competitors of exaggerating individual policy valuations to boost returns.
He said: "Some of our competitors have been claiming returns based on over-inflated valuations that we simply cannot sanction.
"Our own valuation methodology is conservative and backed by an inhouse team including nine actuaries, whereas some companies rely entirely on consultants, which is an inadequate approach."
Patrick McAdams, chairman of Elsa, welcomed the FSA's approach, adding that his organisation was set to launch a code of practice to assist providers of TLP products in self regulation.
SL Investment Management has also taken action to improve the information available to intermediaries, publishing an introductory guide to the TLP sector on its website.
