Extending the lifeline

As the sample size is smaller, by definition, micro longevity is more volatile than macro longevity as a longevity investment. However, the return on both types of investments compare favourably to other asset classes as illustrated by the graph below which shows return versus standard deviation of different asset classes.

For investors who are interested in investing in longevity, where should they start? Due to the complex nature of assessing the risk in this asset class, a pure longevity play is not for the retail investors. There are no longevity Ucits III funds due to diversification issues. Investors who invest into a single life settlement transaction will experience huge volatility in the investment as the return depends solely on the longevity of a single individual. Institutional investors with large funding abilities and resources to analyse the risk factors can invest in large longevity transactions to achieve diversifications. Other smaller institutions should consider investing in a fund where due to collective investments, diversification can also be achieved. When investing in collective investment funds, the key is transparency – understanding the quality of the origination process, the valuation methodology and the liquidity constraints. The final hurdle for investors looking to access longevity through an investment fund is to select an investment manager who has the required experience, knowledge and specialisation in this asset class including a proven and sustainable track record.

David Rawson-Mackenzie is a fund manager for Centurion Fund Managers