Stockholm (HedgeNordic) – The beauty of hedge funds is that no asset class or anything investible is out of reach. Ress Life Investments, for instance, invests in the secondary market for U.S. life insurance policies aiming to provide returns uncorrelated to stock and bond markets or other asset classes. The fund managed by Stockholm-based alternative investment fund manager Resscapital AB, achieved its best annual gain last year since launching in April 2011, returning 9.9 percent in a year when most hedge funds struggled to avoid losses.
Ress Life Investments acquires life insurance policies from their original owners for a lump sum that is lower than their face values or insurance amounts, but much higher than the surrender values policyholders can get from insurance. The fund takes over the payments of premiums and eventually receives the insurance payout.
Although the strategy of investing in life insurance policies appears to be a bet on mortality, Jonas Mårtenson, Founder and Head of Sales at Resscapital, reckons that buying unneeded policies has positive ethical considerations. Selling life insurance policies in the secondary market is an attractive option to policy owners who no longer need insurance for various reasons, either beneficiaries are grown up and financially independent, or the spouses of policyholders are no longer alive or many other reasons.
Ress Life Investments was the fourth best-performing member of the Nordic Hedge Index (NHX) last year after exceeding its annual target return of seven percent. The fund earned an average yearly return of around six percent in the past five years. According to a performance update from Resscapital, the “performance during the year was mainly driven by life insurance policies paying out.” Jonas Mårtenson recently told HedgeNordic that the strong performance in 2018 reflects the fact that “more policies and larger policies paid off during the year.”
The fund owns more than 210 life insurance policies issued by around 50 highly-rated life insurance companies in the United States. Ress Life Investments collected $10.3 million in proceeds from insurance companies during 2018, with the fund currently overseeing $117 million in assets under management. Commenting on their expectations for the current year, the team at Resscapital says “we purchase new policies at high expected returns and are positive about the outlook for 2019.”