Performance and Risks of Open-End Life Settlement Funds
Braun A, Gatzert N, Schmeiser H (2012)
Publication Language: English
Publication Type: Journal article, Original article
Publication year: 2012
Journal
Publisher: Wiley-Blackwell
Book Volume: 79
Pages Range: 193-230
Journal Issue: 1
DOI: 10.1111/j.1539-6975.2011.01414.x
Abstract
In this article, we comprehensively analyze open-end funds dedicated to investing in U.S. senior life settlements. We begin by explaining their business model and the roles of institutions involved in the transactions of such funds. Next, we conduct the first empirical analysis of life settlement fund return distributions as well as a performance measurement, including a comparison to other asset classes. Since the funds contained in our data set cover a large fraction of this relatively young segment of the capital markets, representative conclusions can be derived. Even though the empirical results suggest that life settlement funds offer attractive returns paired with low volatility and are virtually uncorrelated with other asset classes, we find latent risk factors such as liquidity, longevity, and valuation risks. Since these risks did generally not materialize in the past and are hence largely not reflected by the historical data, they cannot be captured by classical performance measures. Thus, caution is advised in order not to overestimate the performance of this asset class.
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Switzerland (CH)How to cite
APA:
Braun, A., Gatzert, N., & Schmeiser, H. (2012). Performance and Risks of Open-End Life Settlement Funds. Journal of Risk and Insurance, 79(1), 193-230. https://dx.doi.org/10.1111/j.1539-6975.2011.01414.x
MLA:
Braun, Alexander, Nadine Gatzert, and Hato Schmeiser. "Performance and Risks of Open-End Life Settlement Funds." Journal of Risk and Insurance 79.1 (2012): 193-230.
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