Life settlement provider warns funds may be overvalued

A life settlement specialist is warning some providers are using outdated valuation methods which could lead to investors losing money.

SL Investment Management believes some funds have not taken into account significant longevity revisions in the last few years and are overvaluing their funds. An assumption the policy will mature at or shortly after the life expectancy of the assured life could lead to over-inflated valuations of as much as 40%, it says.

Chief executive Jeremy Brettell says: "Justifiably, investors are attracted to this asset class by the impressive potential returns and lack of market correlation, but they do need to make sure that the manager has its feet firmly on the ground.

"We have seen examples in the market where the valuation basis and realisable value have become out of step. When this has happened, some investors who subscribed late have paid an inflated price to buy into funds and have since lost a substantial proportion of the value of their original investment.

"It is imperative to team up with a regulated investment manager with the appropriate internal controls and one that has sufficient experience and actuarial expertise of the asset class to ensure a fair outcome to all," he adds.