Fractional Life Shares
A Life Share is a partial interest in a privileged investment vehicle called a life settlement.
The life settlement asset class came into existence over 100 years ago, but has only been available to institutional and ultra high-net-worth investors. As a result of recent legislation, however, it is now accessible to California residents who qualify.
“Smart money” investors including Wells Fargo, Merrill Lynch, and Warren Buffett’s Berkshire Hathaway have quietly placed billions of dollars into life settlements because they offer superior return potential with minimal volatility and no downside risk. Through Life Shares, individuals can now share in the profitability and peace of mind that top investment firms have enjoyed for decades.
As investors continue to search for both safety and yield, many are discovering life settlements. Life Shares allow qualified investors to own fractional shares of life settlement assets, similar to buying shares of stock in a publicly-traded company.
Empirical data continues to show how life settlements have averaged superior returns while keeping principal safe.
The AAP Life Settlement Index
The AAP Life Settlement Index tracks the performance of funds implementing an investment strategy in U.S. life insurance policies (“life settlements”) and serves as a transparent benchmark for the overall life settlement market. The Index allows investors to run performance comparisons and analysis of life settlements to other asset classes, such as stocks, bonds and hedge funds.
Performance Comparisons to Stocks, Bonds & Hedge Funds –
Dec 2006 – Mar 2010
As can be seen by the above chart, as of February 2009, “the S&P [fell] 53% from its October 2007 peak and had seen its worst six-month drop in percentage terms — 42.7% — since 1932, when it dropped 45.44% in the six months ending in June.”
– The Wall Street Journal, Brutal February for Blue Chips, March 1, 2009.
Like investors who lost fortunes during the Great Depression, investors who had all of their money in the S&P 500 would have lost nearly one-half of their principal in February 2009.
During the most recent economic crisis, life settlements performed well against other indices, including the S&P 500 equity index, Credit Suisse’s Hedge Fund and U.S. Bonds. With no correlation to other markets, life settlements can act as a defensive strategy to reduce the overall volatility of an investor’s portfolio.
Perhaps this is why institutional investors have invested billions into life settlements.
According to an 11-year study by The London School of Business, investors purchasing their sample of life settlements could have expected to earn an average cost-weighted internal rate of return of 12.5% per year.
Independent Escrow & Banking Services
The life settlement company appoints a third party Trust to act as its escrow agent and trustee over the trust. The life settlement company is responsible for providing direction to the third party Trust in the management and administration of investor accounts invested in.
The Subscription Escrow Account – The third party Trust, as the escrow agent, accepts the investor’s funds, which are held in escrow, until the investor selects their desired policy or policies. By placing funds into the Subscription Escrow Account, investors are subscribed on a “first come, first served” basis. The minimum investment is $15,000.
Premium Reserve Account – Once the investor selects their policy or policies, the Trustee transfers their funds from the Subscription Escrow Account to secure their purchase and funds the Premium Reserve Account.
The Trustee records and issues the beneficiary rights to the individual “Subscription Escrow Investors”.
The investor receives a recorded confirmation of their beneficial interest from the third pary Trust on their selected policy or policies.
The Trustee makes certain that all required premiums are paid from the Premium Reserve Account, which is held and controlled by their bank.
Once the policy matures, the third party Trust will file the appropriate claim with the highly-rated insurance company. The investor, who owns the beneficial interest in the policy, will receive their proportional, pre-determined share of the policy proceeds.
Disbursement Option – investors can receive all or part of the maturity value as a cash payout, or
Re-Investment Option – investors can re-invest their maturity value by selecting from the current portfolio of policies
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