Our Investment team attended the annual Asset Allocation Conference 2014 in Sydney, hosted by IBR Conferences. This is an excellent event with high-quality presenters from some very significant members of the Australian Investment industry. We were treated to varied observations from industry experts examining both the current state of play in the markets (Domestic and International). As well as, views on the best approaches to strategic asset allocation in an environment which, despite some evidence of “green shoots”, is currently still treading cautiously through uncertain times.
The following are some popular views that were discussed during the 3-day event, which observed economic and investing conditions. Discussions were also substantially driven towards turning the focus back onto investor needs and their end objectives.
Some key standout information has been reviewed below.
In the USA:
- Bond market looks expensive. 10yr yields around 2.5% are under-estimating the strength of the economy, the upside risks to inflation and Fed policy response.
- Corporate credit spreads look too tight – especially due to false liquidity.
- Equities outlook is mixed. Improving economic growth and strong balance sheets are positives. Management is moving from ‘survival’ mode to ‘growth strategies’.
- Higher inflation is the risk that markets are least prepared for.
In the Global Market:
- Global bond yields expected to rise cyclically despite recent pull-back.
- We are in a period of interest volatility with equities.
- Economic growth supporting equity markets – but risks around higher interest rates, wages and inflation
- Infrastructure: The current market seems to indicate that it is probably better at present to be a seller than a buyer given the earnings multiples being generated for major assets like ports.
Framework Going Forward:
- Risk management should be focusing on the pricing of assets, not just volatility.
- Investors should include assets that hedge inflation.
- Investors should be holistically managing their exposures, not just asset classes.
- Decision-making framework is consistent with portfolio (end investor) needs.
The biggest eye-opener for many attendees was that there needs to be a focus on finding alternative investments which are truly uncorrelated to traditional market risks. Volatility and inflation were the hot topics for the day. Additionally, directing focus on long term performance outcomes because month to month diversification does not work in today’s investment market.
It was refreshing to see some very significant Australasian investors have put their toes into the water in the Secondary Life Insurance market as part of their alternate investment strategy. This truly uncorrelated asset is not for everyone but as described above it offers significant risk-adjusted returns in a sensible diversification play.
When planning for strategic asset allocation, the life settlements asset class offers a powerful tool during periods of severe and prolonged market volatility.
Although, in its relatively short history, the life settlements asset class like many others, is littered with examples of poor execution. It was filled with poor structuring decisions, poor execution of management services, poor risk management and poor disclosure of fees and risks to clients. This had resulted in bad headlines and disgruntled investors.
We have focused on many topics in the past including how the best performers in the industry choose the right life settlements investment structure. We also focused on how to collaborate with a reputable fund expert in the industry, estimate gross market return and bench-marking. Doing a little homework, in this ever-evolving asset class, can go a long way towards a successful investment long into the future and avoid the pitfalls of others.
As always we wish you well with your life settlement investment opportunities and if you want to learn more about investing in this asset class please contact.
Disclaimer: This information is intended for qualifying investors only and was correct at the time of preparation. It has been prepared to provide general information only. It should not be considered as a “securities recommendation” or an “invitation to invest” in any jurisdiction. Potential investors should consider the relevance of this information to their particular circumstances. Before proceeding, investors must obtain the prospectus and take their own legal and taxation advice. If you acquire or hold one of our products we will receive fees and other benefits as disclosed in the prospectus and relevant offering documents.