Winners' code

There are however, ways round these issues. Investors should only invest in funds that buy policies with "trusted" partners and where the policy originator has obtained the licence necessary to originate policies in the US state concerned.

Concerns are also frequently raised with respect to stranger originated life insurance whereby life policies are initiated by and for the benefit of unconnected third parties, thus creating a risk of the insurer declaring the policy null and void for failing to comply with an insurable interest requirement.

Investors should not invest in any fund with stranger originated life insurance polices, and all members of the Code are also prohibited from doing so.

Diversification is key

A final word of advice to investors is to spread their risk. It goes without saying that it is prudent to spread one's investments across several different asset classes. A life settlement investment provides a stable, attractive-return diversification option but should only ever be a small component in a retail investor’s wider investment portfolio.

Patrick McAdams is chairman of the European Life Settlement Association