Secured Life fund to target retail market

Managers of the newly launched Secured Life fund are looking to roll out the income producing vehicle to selected retail investors through a UK plan manager.

The fund is based on securitising loans, underpinned by US life insurance policies, to terminally ill people.

It is described by the managers as ‘lower risk' then securitised life settlement funds, which take over the life policies themselves, but also offers the benefit of non-correlation with more traditional asset classes.

The Irish-listed, closed-ended vehicle is currently only available to institutional investors, with a minimum investment of euro 250,000, through a structured note backed by Deutsche Bank.

However, the managers are hoping to interest a UK plan manager in allowing wider access to the fund.

Inflows will be carefully controlled however, as the managers are wary of small retail investors investing all their funds directly into the vehicle. Instead, funds will be given to the plan manager who could then pool the money to invest in the main fund.

The selection of the plan manager will be carefully monitored by Deutsche Bank, which is wary of opening the fund indiscriminately to the mass retail market.

Investors into SLF will be able to choose from either 5, 7 or 10 year investment periods, each of which will provide fixed returns paid annually in arrears.

Returns range from 7.5% for the five year bond, 8% over 7 years, rising to 9% for the 10 year bond.

Andrew Walters, financial director of the fund manager of Secured Life fund (SLF), says: "Securitised life settlement policies have taken something of a bashing of late - but the SLF model is considerably different, offering income seeking investors the opportunity for high rewards balanced by lower risk.

"SLF is totally unique in that it is the only securitisation to use life insurance as loan collateral to specifically targeted US cancer sufferers, who by their very disease state and condition, provide a totally different economic outcome to SLF as lender/bond issuer, than in a life settlement transaction.

"Insurance companies providing the client's policy must be rated ‘A' or better by Standard & Poor's, and of course the policy must mature on the death of the potential customer."

The initial charge is 3% with an AMC of 1.75% and no performance fee.