One Life Settlement Fund (ONE-LS), an alternative investment option, is expected to launch more new funds soon after its third fund was oversubscribed.
Three ONE-LS mutual funds have been launched by One Asset Management (ONEAM), which recently received best innovative company and best REIT performance awards at the SET Awards 2022.
ONE-LS invests in life insurance policies in the US. When people who have held life insurance policies for a while need money or retire, they can surrender the policies to life settlement funds.
The funds offer them a higher amount than the policy surrender value, but less than the value of the claim/maturity proceeds.
Since ONEAM launched its first life settlement fund, ONE-LS-UI (not for retail investors), on Nov 23, 2020, the fund has yielded a return of 10% per year.
ONE-LS2-UI, the second fund launched on Nov 30, 2021, generated an average return of 9-10% per year as well.
The latest fund is ONE-LS3-UI, launched in August. Its investment value is up to 2.25 billion baht, the highest fund value among all the alternative funds in 2022.
All three ONE-LS funds are feeder funds investing in the master fund BlackOak Investors Limited Partnership - Class I (BlackOak).
A highlight of life settlement investment is low volatility regardless of economic conditions. The fund will hold the insurance policies until the end of the contract or sell out when it makes a profit.
In the event of an insurance company bankruptcy, the policy's claims are paid to the policyholders before bond creditors and equity shareholders.
During the US economic slowdown caused by the Covid-19 pandemic, the life settlement fund was not affected and generated a return on investment of 10-15% per year.
"We are always searching for new investment innovations," said Pote Harinasuta, director and chief executive of ONEAM.
"Investing in assets that are not swayed by economic conditions, such as life settlement funds, is the answer."
ONE-LS-UI and ONE-LS2-UI generated satisfactory returns, even when the world faced the severe economic conditions of the pandemic, he said.
The BlackOak master fund has not recorded a negative return during the pandemic or the Federal Reserve's interest rate hikes because life insurance is an asset with low correlation to other assets, said Mr Pote.
There are more than 100 private funds under ONEAM's management that invest in life settlement funds, with a total value of 3 billion baht.
ONEAM's three ONE-LS mutual funds have a total value of more than 4 billion baht.
The total value of all funds under ONEAM invested in life settlement exceeds 7 billion baht.
Life settlement funds continue to attract investment from both private and mutual funds.
The company is preparing to launch a fourth mutual fund soon to accommodate investor demand, he said Mr Pote.
ONEAM's three ONE-LS funds are rated at risk level 8+, which is considered significantly high, which means they are barred from sale to general investors.
These funds can be sold to high net worth investors with a minimum investment of 500,000 baht.
"ONE-LS funds cannot be sold to the general public because they are classified as significantly high risk, according to the definition of Thai mutual fund assets, despite the low volatility," he said.
"This narrows the focus to high net worth investors."
Mr Pote said the concept of life settlement management in the US is interesting and Thai authorities should consider promoting these kinds of policies.
Policyholders have the option to surrender policies to mutual funds for immediate cash payouts, while the funds can generate high returns from surrendered policies with relatively low risk and volatility, he said.
The Thai insurance policy market is much smaller than the US market, but life settlement is considered a financial tool that benefits both insurance and investment industries, said Mr Pote.
For the investment outlook in 2023, he said a potential recession will continue to pressure the stock market, making people cautious about investing in risky assets.
This pressure is expected to cause foreign stock markets to continue their fluctuation, said Mr Pote. But some bourses have a high chance of recovery, such as Thailand, China and Vietnam, he said.
As for investing in bonds, when interest rates are close to a peak, investors should switch from short-term bonds to long-term debt instruments, said Mr Pote.
For investment asset allocation next year, he recommends investing in global equity at 50%, long-term bonds 30% and alternative investment 20%.
