InvestmentsMay 1 2013

Investors trapped as another life settlement fund suspends

Search sponsored by
ByNick Reeve

Managing Partners Limited (MPL) has moved to prevent investors from exiting its £99.4m Traded Policies fund, in the latest example of a traded life settlement policy fund freezing investor redemptions.

The suspension comes as the managers are concerned about low levels of available ‘liquidity’ on the unregulated collective investment scheme, which is obliged to retain 3-5 per cent of liquidity - in other words cash or cash-like assets - under its prospectus rules.

If liquidity dried up completely on a life settlement fund it could become unable to meet its ongoing premium payment obligations on the traded life settlement policy portfolio.

Traded life settlement policy funds buy up unwanted life policies and maintain payments on the policies until the original holder dies, at which point the fund receives the policy payout from the life insurer.

The Cayman Islands-based Traded Policies fund is available on platforms including Novia.

MPL chief executive Jeremy Leach said the suspension was imposed last month “in the interests of existing and future investors as well as those who wish to redeem”.

Mr Leach claimed it was “business as usual” in spite of the suspension and maintained the fund had a “long-term future”, adding that investors can continue to subscribe for new shares in the monthly-dealing fund.

The sterling-denominated “growth” share class of the Traded Policies fund has gained 53.6 per cent in five years to April 30, according to FE Analytics.

In December 2011 EEA Fund Management suspended dealing in its $995m EEA Life Settlements fund, which it blamed on a high level of redemptions following the FSA’s proposed ban on sales of the asset class to retail investors. However, the fund is yet to reopen after almost 18 months.

At the time, Mr Leach moved to reassure investors that MPL’s Traded Policies fund was solvent and had maintained a 5 per cent cash buffer to pay premiums on the life insurance policies which make up its portfolio.