Ress Life Investments

Resscapital AB

Strategy Description

Resscapital AB is an alternative investment fund manager (AIFM) authorised and regulated by the Swedish Financial Services Authority (Finansinspektionen). We are the fund manager for Ress Life Investments, a fund investing in the secondary market for US life insurance policies, also known as life settlements.

Ress Life Investments is listed at Nasdaq Copenhagen since 2015 and owns a diversified life insurance portfolio. We have developed proprietary portfolio management systems and pricing models, in order to gain an advantage when purchasing policies. We also collaborate with independent medical underwriters specialising in senior mortality in order to provide more accurate assessments and mortality distributions.

Our management team has extensive experience in the secondary market for life insurance policies (life settlements), complimentary backgrounds and international experience from having worked at major banks and hedge funds. The board of directors consists of both successful entrepreneurs and senior managers with extensive experience from the financial industry.

Fund Information

General Information

NHX CategoryDiversified
NHX CountrySweden
Legal StructureInvestment Company
Fund DomicileDenmark
Minimum Investment200,000 USD
AUM294M USD
Inception DateApr 2011
Management Fee1.50%
Performance Fee15.00%
SFDR Classification -

Company Information

CompanyResscapital AB
Investor RelationsHanna Persson
AddressSturegatan 46
Stockholm, 114 36
Phone+46 8 545 282 09
E-mail[email protected]
Websitewww.resscapital.com
Social Media

Monthly Performance

  Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2024 0.65 0.02 0.84 0.53 0.20 0.82 0.06 0.09 0.82 0.29 0.54 1.46 6.50
2023 -0.07 0.04 0.05 -0.04 -0.23 0.04 0.15 0.14 0.87 0.45 -0.10 0.29 1.60
2022 0.18 -0.15 -0.04 1.28 2.22 3.50 -0.11 0.19 0.71 0.26 -0.53 0.74 8.49
2021 -0.61 -0.09 0.02 0.35 0.71 0.06 0.11 -0.21 2.46 1.85 0.56 0.02 5.31
2020 -0.03 0.51 -0.40 -0.24 0.90 1.30 4.20 -0.42 -0.80 1.55 -0.18 0.70 7.22
2019 0.26 0.90 0.45 0.08 0.58 1.99 0.26 0.15 0.97 0.46 0.48 1.15 7.99
2018 0.27 -0.11 0.21 -0.05 5.57 -0.03 0.71 0.38 1.71 0.29 0.52 0.15 9.91
2017 0.04 0.15 5.12 0.86 -0.06 0.77 -0.15 0.02 0.01 -0.03 -0.02 -0.03 6.77
2016 1.41 -0.63 1.24 0.40 -0.77 -0.56 1.02 0.09 -0.02 0.43 0.06 0.01 2.68
2015 3.31 0.51 0.25 0.55 0.02 -1.26 1.53 0.10 0.18 -0.98 0.37 1.23 5.89
2014 0.36 0.47 0.29 0.11 0.09 -0.15 0.25 0.01 0.24 1.60 0.42 1.04 4.82
2013 0.05 -0.03 0.08 -0.02 0.70 -0.15 0.37 0.19 0.01 0.28 0.29 0.06 1.85
2012 -0.46 -1.06 -1.57 -0.12 0.18 -0.31 0.53 -0.05 0.01 0.27 0.01 0.00 -2.54
2011 0.00 -0.44 -0.41 -0.66 -1.18 -0.60 -0.61 -1.59 -0.84 -6.18

Portfolio Managers

Anton Pozine, Head of Portfolio Management, has extensive experience within the life settlements and longevity linked space. Anton joined Resscapital in 2011 and has reviewed longevity-linked securities with over USD 10 billion in face value and has purchased life insurance policies with over USD 450 million in face value. Anton holds a M.Sc. in Industrial Engineering and Management from the Linkoping Institute of Technology in Sweden.

Disclaimer

This information is intended for institutional investors only. All data including performance numbers have been supplied by the respective managers and funds. HedgeNordic in no way guarantees the accuracy of these numbers and has supplied them to you for information purposes only. This does not constitute a solicitation to buy or an offer to sell. No investment should be made without fully reviewing the associated risk factors, fees and conflicts of interest as outlined in each fund’s risk disclosure document. There may be funds which have chosen not to be listed in the HedgeNordic database and the NHX that may have better or worse performance than those in our database.

The risk of loss in investing in hedge funds can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Past results are not necessarily indicative of future results. Trade only with risk capital. Sales restrictions may apply in your jurisdiction.

Monthly Returns

Performance (VAMI)

Distribution of Monthly Returns

12 MONTH ROLLING ROR Return

Drawdown Report

No. Depth (%) Length (Months) Recovery (Months) Start date End date
Fund Index Fund Index Fund Index Fund Index Fund Index
1 -9.28% 14 31 05/2011 01/2015
2 -1.33% 2 4 05/2016 10/2016
3 -1.26% 1 1 06/2015 07/2015
4 -1.22% 2 1 08/2020 10/2020
5 -0.98% 1 2 10/2015 12/2015

Drawdown

Up Capture vs. NHX Composite

Down Capture vs. NHX Composite

Time Window Analysis

3 Months6 Months1 Year2 Years3 Years
Avg. Monthly Return0.76%0.54%0.53%0.33%0.45%
% Positive100.00%100.00%100.00%83.33%77.78%
Avg. Pos. Period0.76%0.54%0.53%0.42%0.62%
Avg. Neg. Period - - - -0.11%-0.16%
Sharpe Ratio5.263.874.492.842.11
Sortino Ratio0.000.000.0021.1814.92
Monthly Volatility0.50%0.49%0.41%0.40%0.74%

Return Report

Period BestWorstAverageMedianLastWinning %
1 Month 5.57%-1.59%0.36%0.15%1.46%69.70%
3 Months 7.15%-3.06%1.07%0.71%2.30%80.98%
6 Months 8.83%-5.99%2.19%1.68%3.30%90.00%
1 Year 12.55%-9.16%4.69%5.68%6.50%92.21%
2 Years 19.08%-8.50%10.59%11.50%8.20%92.96%
3 Years 27.27%-5.83%17.40%19.12%17.38%94.62%
5 Years 45.41%5.36%32.23%34.38%32.55%100.00%

Volatility (12 Months Rolling)

CORRELATION (12 MONTH ROLLING)

AUM (EUR)

Disclaimer

This information is intended for institutional investors only. All data including performance numbers have been supplied by the respective managers and funds. HedgeNordic in no way guarantees the accuracy of these numbers and has supplied them to you for information purposes only. This does not constitute a solicitation to buy or an offer to sell. No investment should be made without fully reviewing the associated risk factors, fees and conflicts of interest as outlined in each fund’s risk disclosure document. There may be funds which have chosen not to be listed in the HedgeNordic database and the NHX that may have better or worse performance than those in our database.

The risk of loss in investing in hedge funds can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Past results are not necessarily indicative of future results. Trade only with risk capital. Sales restrictions may apply in your jurisdiction.

Strategy Description

Resscapital AB is an alternative investment fund manager (AIFM) authorised and regulated by the Swedish Financial Services Authority (Finansinspektionen). We are the fund manager for Ress Life Investments, a fund investing in the secondary market for US life insurance policies, also known as life settlements.

Ress Life Investments is listed at Nasdaq Copenhagen since 2015 and owns a diversified life insurance portfolio. We have developed proprietary portfolio management systems and pricing models, in order to gain an advantage when purchasing policies. We also collaborate with independent medical underwriters specialising in senior mortality in order to provide more accurate assessments and mortality distributions.

Our management team has extensive experience in the secondary market for life insurance policies (life settlements), complimentary backgrounds and international experience from having worked at major banks and hedge funds. The board of directors consists of both successful entrepreneurs and senior managers with extensive experience from the financial industry.

Annual Performance

Fund Information

General Information

NHX CategoryDiversified
NHX CountrySweden
Legal StructureInvestment Company
Fund DomicileDenmark
Minimum Investment200,000 USD
AUM294M USD
Inception DateApr 2011
Management Fee1.50%
Performance Fee15.00%
SFDR Classification -

Company Information

CompanyResscapital AB
Investor RelationsHanna Persson
AddressSturegatan 46
Stockholm, 114 36
Phone+46 8 545 282 09
E-mail[email protected]
Websitewww.resscapital.com
Social Media

Portfolio Managers

Anton Pozine, Head of Portfolio Management, has extensive experience within the life settlements and longevity linked space. Anton joined Resscapital in 2011 and has reviewed longevity-linked securities with over USD 10 billion in face value and has purchased life insurance policies with over USD 450 million in face value. Anton holds a M.Sc. in Industrial Engineering and Management from the Linkoping Institute of Technology in Sweden.

Monthly Performance

  Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2024 0.65 0.02 0.84 0.53 0.20 0.82 0.06 0.09 0.82 0.29 0.54 1.46 6.50
2023 -0.07 0.04 0.05 -0.04 -0.23 0.04 0.15 0.14 0.87 0.45 -0.10 0.29 1.60
2022 0.18 -0.15 -0.04 1.28 2.22 3.50 -0.11 0.19 0.71 0.26 -0.53 0.74 8.49
2021 -0.61 -0.09 0.02 0.35 0.71 0.06 0.11 -0.21 2.46 1.85 0.56 0.02 5.31
2020 -0.03 0.51 -0.40 -0.24 0.90 1.30 4.20 -0.42 -0.80 1.55 -0.18 0.70 7.22
2019 0.26 0.90 0.45 0.08 0.58 1.99 0.26 0.15 0.97 0.46 0.48 1.15 7.99
2018 0.27 -0.11 0.21 -0.05 5.57 -0.03 0.71 0.38 1.71 0.29 0.52 0.15 9.91
2017 0.04 0.15 5.12 0.86 -0.06 0.77 -0.15 0.02 0.01 -0.03 -0.02 -0.03 6.77
2016 1.41 -0.63 1.24 0.40 -0.77 -0.56 1.02 0.09 -0.02 0.43 0.06 0.01 2.68
2015 3.31 0.51 0.25 0.55 0.02 -1.26 1.53 0.10 0.18 -0.98 0.37 1.23 5.89
2014 0.36 0.47 0.29 0.11 0.09 -0.15 0.25 0.01 0.24 1.60 0.42 1.04 4.82
2013 0.05 -0.03 0.08 -0.02 0.70 -0.15 0.37 0.19 0.01 0.28 0.29 0.06 1.85
2012 -0.46 -1.06 -1.57 -0.12 0.18 -0.31 0.53 -0.05 0.01 0.27 0.01 0.00 -2.54
2011 0.00 -0.44 -0.41 -0.66 -1.18 -0.60 -0.61 -1.59 -0.84 -6.18

Return Statistics

Last Month Return -
3 Month Return 2.30%
Year to Date Return 6.50%
12 Month Return 6.50%
36 Month Return 17.38%
Total Return Annualized 4.29%
Winning Months (%) 69.70%
Average Winning Month 0.68%
Average Losing Month -0.39%
Total Return Cumulative 78.27%

Risk Statistics (12M)

1 Year
Sharpe Ratio4.49
Sortino Ratio0.00
Sterling0.65
Calmar -
Skewness0.86
Kurtosis1.43
Maximum Drawdown0.00%
Correlation vs S&P 500-0.35
Annualized Volatility1.41%
Annualized Down. Deviation0.00%

Risk/Return Comparison

Monthly Returns

Performance (VAMI)

Distribution of Monthly Returns

12 MONTH ROLLING ROR Return

Drawdown Report

No. Depth (%) Length (Months) Recovery (Months) Start date End date
Fund Index Fund Index Fund Index Fund Index Fund Index
1 -9.28% 14 31 05/2011 01/2015
2 -1.33% 2 4 05/2016 10/2016
3 -1.26% 1 1 06/2015 07/2015
4 -1.22% 2 1 08/2020 10/2020
5 -0.98% 1 2 10/2015 12/2015

Drawdown

Up Capture vs. NHX Composite

Down Capture vs. NHX Composite

Time Window Analysis

3 Months6 Months1 Year2 Years3 Years
Avg. Monthly Return0.76%0.54%0.53%0.33%0.45%
% Positive100.00%100.00%100.00%83.33%77.78%
Avg. Pos. Period0.76%0.54%0.53%0.42%0.62%
Avg. Neg. Period - - - -0.11%-0.16%
Sharpe Ratio5.263.874.492.842.11
Sortino Ratio0.000.000.0021.1814.92
Monthly Volatility0.50%0.49%0.41%0.40%0.74%

Return Report

Period BestWorstAverageMedianLastWinning %
1 Month 5.57%-1.59%0.36%0.15%1.46%69.70%
3 Months 7.15%-3.06%1.07%0.71%2.30%80.98%
6 Months 8.83%-5.99%2.19%1.68%3.30%90.00%
1 Year 12.55%-9.16%4.69%5.68%6.50%92.21%
2 Years 19.08%-8.50%10.59%11.50%8.20%92.96%
3 Years 27.27%-5.83%17.40%19.12%17.38%94.62%
5 Years 45.41%5.36%32.23%34.38%32.55%100.00%

Volatility (12 Months Rolling)

CORRELATION (12 MONTH ROLLING)

AUM (EUR)

Disclaimer

This information is intended for institutional investors only. All data including performance numbers have been supplied by the respective managers and funds. HedgeNordic in no way guarantees the accuracy of these numbers and has supplied them to you for information purposes only. This does not constitute a solicitation to buy or an offer to sell. No investment should be made without fully reviewing the associated risk factors, fees and conflicts of interest as outlined in each fund’s risk disclosure document. There may be funds which have chosen not to be listed in the HedgeNordic database and the NHX that may have better or worse performance than those in our database.

The risk of loss in investing in hedge funds can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Past results are not necessarily indicative of future results. Trade only with risk capital. Sales restrictions may apply in your jurisdiction.

Longevity as a Source of Returns and Diversification
16/04/2024

Stockholm (HedgeNordic) – Risk is not merely an inherent aspect of financial markets; it also stands as a fundamental source of returns for asset classes. Each asset class embodies different risk factors, collectively contributing to its return potential and diversification benefits. While traditional investments compensate for conventional risks such as systematic equity risk, credit risk, or liquidity risk, among others, Ress Life Investments distinguishes itself by offering investors an alternative risk exposure and source of diversification and returns – longevity risk. This entails investing in life insurance policies in the secondary market in the United States.

“Often, investors receive compensation for the risks they are taking when investing, with these risks often tied to some form of economic variables,” explains Hanna Persson of Ress Capital, the investment manager for Ress Life Investments. “In the case of our fund,” she emphasizes, “the main underlying risk that investors are being compensated for is longevity, which makes it fundamentally uncorrelated.” Despite over a decade of experience in the asset class since founding Ress Capital in 2011, Jonas Mårtenson continues to surprise investors by revealing the existence of additional sources of risk. “It’s quite an unusual risk for investors,” he remarks. “Investors are not used to talking about longevity risk, which often leads to an ‘aha’ moment when speaking about this asset class.”

“In the case of our fund, the main underlying risk that investors are being compensated for is longevity, which makes it fundamentally uncorrelated.”

Hanna Persson

With a team of five individuals within the portfolio management team, Ress Life Investments aims to capitalize on this longevity risk by identifying policies in the market where there is a mismatch in price and the risk-reward potential. By combining such policies into a portfolio, the team aims to provide a diversified, positively skewed, and uncorrelated stream of returns. The key to successful investing in the U.S. secondary market for life insurance policies lies in accurately estimating an individual’s life expectancy. “When buying an insurance policy, we need to estimate the life expectancy of the individual who is selling the policy,” explains Persson. “Tons of historical and forward-looking data is taken into consideration to make a good estimate of the duration for which we will continue to pay the premiums. We then do a net present valuation to determine the amount we are willing to pay for each policy.”

With a portfolio comprising over 530 underlying insurance policies, the distribution of probable outcomes follows a bell-shaped curve. This suggests that 50 percent of individuals are expected to outlive their life expectancy, while the remaining 50 percent are anticipated to live shorter than their projected lifespan. “With an average age of 78 years in our portfolio,” notes Persson, “our estimate suggests that, on average, all the individuals are going to live an additional ten years, with an uncertainty interval of around six months.”

Ress Life Investments anticipates a gross annual return exceeding 10 percent at the average estimated life expectancy. However, if the entire group’s life expectancy increases at the portfolio level, the expected return of the portfolio decreases accordingly. “The key is to build a large portfolio of policies, and the outcomes align more closely with our estimates as the portfolio grows in size.”

The Return, Diversification, and Protection Characteristics

Launched in 2011 as an alternative investment fund, the team behind Ress Life Investments has demonstrated proficiency in accurately estimating life expectancies and generating appealing uncorrelated returns for investors. Targeting a net return of seven percent annually in U.S. dollars, Ress Life Investments has achieved an annualized return of 6.7 percent over the past seven years and 6.0 percent over the past decade. “Our long-term return in recent years was above seven percent until 2023, a year marked by lower-than-average payouts,” remarks Jonas Mårtenson. “If we get an above-average return in 2024, we will be returning to our target levels.”

“Our long-term return in recent years was above seven percent until 2023, a year marked by lower-than-average payouts. If we get an above-average return in 2024, we will be returning to our target levels.”

Jonas Mårtenson

This appealing return stream comes with a blend of uncorrelation and limited downside risk. Over the past five years, for instance, Ress Life Investments has exhibited a negative 0.1 percent correlation with the MSCI World index, nearly zero correlation with bond investments as reflected by the Bloomberg Aggregate Bond Index, and a negative 0.04 correlation with a broad index tracking the performance of global hedge funds. “Throughout the strategy’s decade-long journey, it has remained unaffected by external factors that commonly impact most other asset classes,” says Persson.

“In addition to the attractive risk-adjusted return, the investment provides capital preservation and diversification benefits,” reiterates Persson. Ress Life Investments has shown minimal drawdowns since its inception. Excluding the initial two years, which marked the portfolio’s build-up phase when the portfolio was too small in size and policies were purchased with limited payouts, the largest drawdown has been around minus 1.3 percent. The investment strategy in life insurance policies entails paying premiums until policies mature and then pay out the insurance amount in one lump sum.

“In addition to the attractive risk-adjusted return, the investment provides capital preservation and diversification benefits.”

Hanna Persson

The investment’s stability is further evidenced by its low volatility, typically fluctuating within a narrow 3-4 percent range over the past decade, rendering the fund suitable for capital preservation, as highlighted by Persson. Interestingly, the fund’s limited volatility in returns does not stem from infrequent valuation, a characteristic common in most other private asset classes. “We perform the mark-to-market valuation of our life insurance portfolio twice per month,” notes Mårtenson. 

While the value of life insurance investments tends to appreciate with age and can be influenced by mark to market effects due to changes in discount rates, the primary driver of returns for Ress Life Investments each year remains the actual realized value of matured or sold policies. “The value of owning a policy increases over time. This is logical, as we would pay more for a policy with a five-year life expectancy than for one with a ten-year life expectancy,” explains Mårtenson. However, the realized returns from sold or matured policies have consistently accounted for the majority of the fund’s annual returns. “The realized value from matured or sold policies is truly the driver of performance one would want in the portfolio rather than a model-based re-valuation,” emphasizes Persson.

Last Year’s Return and Future Expectations

After experiencing one of its strongest years in 2022 with a return of 8.5 percent, 2023 presented an anomaly due to the low payouts for Ress Life Investments, resulting in a return of 1.6 percent. “The performance in 2023 reflects a lower-than-expected number of policies paying out,” explains Persson. “While still within the confidence interval, indicating it’s a plausible event, it was somewhat to the extreme,” she elaborates. The performance reflects not only a reduced number of payouts but also the payouts from policies with below-average face values.

The average policy face value in the portfolio stands at $2.7 million, yet the average policy that paid out in 2023 was less than $1 million. This lower-than-expected occurrence of payouts is expected to result in a higher number of policies paying out in the upcoming years. Gustaf Hagerud, CEO of Ress Capital and Ph.D. in financial statistics, along with his team, expects a reversion to the mean in terms of the number of policies paying out. “We are hesitant to say that the number of policies paying out will be higher this year, but over a longer period of time, these figures tend to regress to the mean,” says Persson. “We anticipate higher numbers of policies paying out over time, whether it’s this year, next year, or within a three-year span. It’s impossible to predict with certainty.”

“Interest rates may come down in the future, but we will continue to deliver seven percent.”

Jonas Mårtenson

Mårtenson and his team remain confident that Ress Life Investments is on track to reaching its long-term objective of achieving a seven percent return in U.S. dollars net of fees. “While we may have fallen short of our seven percent target in recent years due to the subdued performance in 2023, we had been above our target for many years,” he notes. Acknowledging that a higher interest rate environment may diminish the attractiveness of this return stream in the short term, Mårtenson highlights its inherent benefits of limited downside, low volatility, and lack of correlation. “Interest rates may come down in the future, but we will continue to deliver seven percent.”

This article is part of HedgeNordic’s Nordic Hedge Fund Industry Report.

Beyond Returns: The Socially Responsible Side of Life Insurance Investing
21/12/2023

Stockholm (HedgeNordic) – As an investment fund specializing in acquiring life insurance policies on the secondary market in the United States for over a decade, Ress Life Investments has effectively demonstrated the return potential and diversification attributes of this asset class. This strategy exploits the structural dislocation of valuations of life insurance policies. Despite the evident financial appeal of the asset class – which collects a financial benefit when the insured passes away, the growing emphasis on Environmental, Social, and Governance (ESG) principles in the investment landscape prompts consideration of the ethical and moral aspects associated with purchasing and owning such policies.

This consideration brings us to the reason behind the existence of the secondary market for life insurance policies. “The existence of a secondary market for US life insurance policies is a consequence of a structural inefficiency in the primary market,” explains Hanna Persson, Head of Sales at Ress Capital. The standard terms for life insurance in the US are often valid until the person reaches the age of 120, while many individuals do not need life insurance coverage once they have retired. “At retirement age, a person who has paid insurance premiums on a policy for many years, may own a life insurance policy with a significant positive value,” explains Persson. “Since the insurance policy has a positive value, the individual policyholder owns a financial asset worth a considerable amount of money.”

“The existence of a secondary market for US life insurance policies is a consequence of a structural inefficiency in the primary market.”

Hanna Persson

An insured who no longer wants, needs or affords the life insurance policy has three different options: 1) lapse the policy by not paying the premiums, 2) surrender the policy to the insurance company for a surrender value or, 3) sell it in the secondary market to capitalize on this asset.

Unfortunately, “Most policyholders are not aware of the possibility to sell their policy,” Persson points out, leading to lapses that result in policies never paying out. In 2022 alone, policies with a total face value of approximately $650 billion lapsed, according to data gathered by the Life Insurance Settlements Association (LISA). 

Source : Life Insurance Settlements Association (LISA).

Fund managers such as Ress Capital provide liquidity for sellers and ensure a better pricing mechanism by paying the financial value of the sold policies. Data from the Life Insurance Settlements Association (LISA) indicates that sellers historically received 6-8 times more than the cash surrender value paid by the life insurance companies. The existence of a secondary market for US life insurance, therefore, has social benefits and can be used as an additional alternative funding option for retirement. 

The Transaction

For many households in the United States, life insurance constitutes an indispensable component of family financial protection against unforeseen events. “It is of great importance that the sale of a life insurance policy occurs in a way that safeguards the interests of the whole household,” states Jonas Mårtenson, the founder of Ress Capital who also serves on the board of the industry association ILMA in the United States. ILMA actively works for prudent and stringent regulation of the life settlements market.

“It is of great importance that the sale of a life insurance policy occurs in a way that safeguards the interests of the whole household.”

Jonas Mårtenson

Regulatory bodies have duly recognized this need, with the secondary market for life insurance policies subject to regulation in 45 states, thereby ensuring transparency and consumer protection. The sales process of life insurance policies involves only intermediaries registered and authorized by state regulators, with clear reporting of brokerage fees and information about the policy’s surrender value provided to the consumer.

“As a part of the transaction process, the policyholder must certify that he, or she, makes a conscious decision to sell the life insurance policy,” says Mårtenson. “Additionally, beneficiaries, typically spouses or children of the policyholder, must agree in writing to the sale.”

As an active participant in the life settlements market, Ress Capital places a strong emphasis on adhering to ethical standards and ensuring consumer protection. “There is a systemized process for the settlement to take place and no contact will occur between Ress Capital and the original beneficiary of the policy,” emphasizes Mårtenson. The company’s dedication to the development of ethical norms centers around prioritizing the interests of the consumer and promoting a framework that ensures transparency and fairness.

Any Possible Moral Issues Facing the Asset Class

Investors collect policy benefits upon the insured’s death, prompting questions about the morality of investing in this asset class. “It is true that a policy paying out earlier will be beneficial financially. But keep in mind that the opposite holds where individuals outlive their life expectancy,” says Gustaf Hagerud, who is the CEO of Ress Capital and holds a PhD in Financial Statistics. Investing in this asset class, he clarifies, revolves around holding a diverse pool of policies that are paying out either earlier or later relative to mortality expectations.

“The asset class is not about a single individual’s death, it is about a large pool of policies that will either pay out earlier or later, relative to mortality expectations,” emphasizes Hagerud. The law of large numbers brings actual outcomes closer to expected values as the number of policies in the portfolio grows. “Through that mechanism, the longevity risk defined as the uncertainty of outcomes will be reduced.”

“The asset class is not about a single individual’s death, it is about a large pool of policies that will either pay out earlier or later, relative to mortality expectations.”

Gustaf Hagerud

The focus in portfolio management is to create a portfolio with policies that, on average, pay out as expected. Hagerud, drawing from his background in the pension industry with experience at employers such as AP3, AP1, and Alecta, points out that the possible moral dilemma in this asset class can be compared to that present in a defined benefit pension fund or for a financial institution issuing annuities to clients. “In a defined benefit pension fund, the level of cash flows paid to members will depend on the return of the fund’s investments and the survival probabilities of members,” explains Hagerud. “Members who live a shorter life than expected will subsidize members who live longer than expected,” he elaborates. “Thus, a steady pay-out to older members can only be possible if some members have a shorter life. Clearly, this business model is not regarded as immoral.”

Essentially, any product promising cash flows linked to longevity faces the reality of some clients benefiting more than others. However, at a portfolio level, the impact is limited to changes in the average longevity of clients. “It is important to neither under- nor overestimate longevity,” notes Hagerud. “This is true for pension funds, financial institutions issuing annuities as well as for funds that invest in life insurance policies.”

Ress Capital’s Own ESG Efforts

ESG investing has gained considerable momentum as investors increasingly aim to align their financial objectives with sustainable and responsible practices. While life settlements do not have a direct environmental impact, they offer a distinctive avenue for investors to make a positive social impact by facilitating fair compensation for policyholders willing to sell their life insurance policies as described above. Amanda Gustafsson (pictured left), a junior portfolio manager at Ress Capital, and Johan Jonson (pictured right), the asset manager’s risk manager, have been spearheading the team’s efforts to understand how the team can contribute to broader ESG objectives.

“Amanda and I have been looking at our operations to understand how we can incorporate ESG, contribute and make a positive impact on ESG,” says Jonson. As a buyer of life insurance policies, Ress Capital has focused its ESG integration efforts on assessing the risk associated with insurance companies, with a particular emphasis on their ESG ratings, among other factors.

“We are working to ensure that the life insurance companies in our portfolio don’t violate conventions for international agreements on human rights, such as the UN Global Compact or OECD guidelines,” explains Amanda Gustafsson. “To assess this, we retrieve ESG risk data from Sustainalytics and other data providers to make sure we minimize sustainability-related risk in our portfolio.” Sustainability risks are considered both during the investment process and regularly through portfolio screenings. If an insurance company behind certain policies has a poor ESG risk score, the Ress Capital team evaluates how to approach these investments.

“…we retrieve ESG risk data from Sustainalytics and other data providers to make sure we minimize sustainability-related risk in our portfolio.”

Amanda Gustafsson

The second area involves the decision-making process when considering the purchase of a particular policy. “We actively decide when analyzing policies, allowing us to exclude policies we are not comfortable with, either due to the issuing insurance company or other reasons,” according to Jonson. For instance, Ress Capital’s approach to mitigating longevity risk involves acquiring policies from healthy retirees with long life expectancies and opting for conservative estimates of life expectancies, avoiding policies from individuals with shorter life expectancies.

“We actively decide when analyzing policies, allowing us to exclude policies we are not comfortable with, either due to the issuing insurance company or other reasons.”

Johan Jonson

As an Article 8 fund, Ress Life Investments aims to promote social characteristics but does not have sustainable investment as its objective. As an additional step in their commitment to sustainability, Ress Capital signed the Principles for Responsible Investments (PRI) in 2017. In their efforts to effectively incorporate ESG issues into their processes, the team at Ress Capital has engaged with service providers by sending out a questionnaire with a set of questions on ESG-related issues. 

Jonson emphasizes the importance of this engagement, stating, “This was a statement to our service providers, indicating that ESG-related issues are important for us and showcasing how we approach this area.” He concludes by acknowledging that Ress Capital, as a small firm with limited resources, can still make a meaningful difference by evaluating its business practices and finding ways to contribute positively to ESG objectives.

Ress Capital’s Hanna Persson Appointed to ELSA Board
20/09/2023

Stockholm (HedgeNordic) – Hanna Persson of Ress Capital has been appointed to the Executive Board of the European Life Settlement Association (ELSA). This appointment, alongside two other industry professionals, is set to take effect from January 2024.

ELSA was founded in 2009 with the primary objective of setting standards for participants in the European life settlement industry. Ress Capital, the asset manager where Persson has been serving as Head of Sales and Investor Relations since the beginning of 2023, operates an alternative investment fund, Ress Life Investments, specialized in investing in U.S. life insurance policies.

Hanna Persson, Chris Conway of ISC Services and Jule Rousseau of ArentFox Schiff were elected as members of ELSA’s Executive Board during its Annual General Meeting held on September 11. Their terms will commence at the beginning of 2024. “We are delighted to welcome Chris, Hanna, and Jule to our Executive Board,” comments Chris Wells, Executive Director of ELSA. “Their extensive expertise and dedication to our industry will undoubtedly strengthen ELSA’s position as a leading voice in the European life settlement sector. We eagerly anticipate their contributions.”

“I am eager to collaborate with fellow board members to further the organization’s commitment to ethical practices and advocate for the continued growth of the European life settlement market.”

“Joining the ELSA Executive Board is an exciting endeavor,” Hanna Persson comments on her appointment to ELSA’s Executive Board. “I am eager to collaborate with fellow board members to further the organization’s commitment to ethical practices and advocate for the continued growth of the European life settlement market.” Hanna Persson joined Ress Capital in early 2023 to focus on increasing awareness of the attractive characteristics of life insurance investments and expanding the reach of Ress Life Investments to a wider investor audience.

Ress Life Investments operates as an alternative investment fund investing in life settlements, which involves the purchase of life insurance policies from policy owners who no longer require or desire their policies, in exchange for one-time payments. The fund delivered a return of 8.5 percent in 2022, marking its second-best annual performance since launching in 2011. Ress Life Investments has achieved an annualized return of 6.3 percent in U.S. dollars despite experiencing a quieter 2023 in terms of policy payouts. The number of policy payouts during the first eight months of the year was below expected levels, reflecting the stochastic and uncorrelated nature of the return stream from its life insurance portfolio.

Resscapital’s Key Appointment in Pursuit of Awareness
20/01/2023

Stockholm (HedgeNordic) – To capitalise on strong performance and continued asset growth in 2022, Resscapital made a key appointment to its investor sales and relations team. The asset manager of Ress Life Investments – a fund that seeks to generate uncorrelated, equity-like returns with low volatility in the secondary market for life settlements – has appointed Hanna Persson as Head of Sales and Investor Relations.

“Today marks a new chapter for me. I’m very excited about joining the fantastic team at Resscapital AB in Stockholm, who offers truly diversifying, stable returns,” Hanna Persson announces on LinkedIn. “Looking forward to reconnect with everyone from my new home,” she adds. “Welcome Hanna! So much looking forward to working together and taking our award-winning fund, Ress Life Investments, to new heights,” comments Jonas Martenson, the founder of Resscapital. 

Persson joins Resscapital from Stockholm-based asset manager East Capital, where she served as Senior Client Relationship Manager. Prior to joining East Capital in September 2021, Persson worked at now-closed systematic investment manager IPM Informed Portfolio Manager in various roles for close to 11 years. Persson’s most recent role at IPM was as Senior Director, Head of Consultant and Investor Relations. 

Hanna Persson will focus on increasing awareness to the attractive investment characteristics of a life insurance portfolio and bring Ress Life Investments to wider investor audience. Ress Life Investments is an alternative investment fund investing in life settlements, which involves buying life insurance policies for one-time payments from policy owners who no longer need or want their policies.  

The fund returned 8.5 percent in 2022, its second-best annual performance since launching in 2011. Under the stewardship of Head of Portfolio Management Anton Pozine, Ress Life Investments has delivered an annualized return of 7.8 percent in U.S. dollars over the past five years. “The performance in 2022 clearly shows the fundamentally uncorrelated return of a life insurance portfolio,” says Gustaf Hagerud, Managing Director at Resscapital. “The asset class offers both a good risk diversification and a counter-cyclical return.” 

Team Ress Grows with Junior PM
26/09/2022

Stockholm (HedgeNordic) – The Stockholm-based portfolio management team picking and buying U.S. life insurance policies for Ress Capital’s alternative investment fund, Ress Life Investments, has expanded with the hiring of Amanda Gustafsson as Junior Portfolio Manager. The now four-member portfolio management team also includes Head of Portfolio Management Anton Pozine, as well as Portfolio Managers Fredrik Thor and Markus Biamont.

“We are delighted to announce that Amanda Gustafsson recently joined Ress Capital AB as Junior Portfolio Manager,” announces Ress Capital founder Jonas Mårtenson. “The interest in our uncorrelated return profile is increasing in the current market and Amanda will support the company’s accelerated growth”. Gustafsson has joined Resscapital from Strivo – formerly Strukturinvest, where she worked in operations management. She also worked as Portfolio Administrator and Corporate Actions at ISEC Group, as well as within Clearing and Settlement at Mangold Fondkommission.

Ress Life Investments, which buys attractively-valued U.S. life insurance policies on the regulated secondary market, has seen its assets under management grow to $377 million at the end of August from $310 million at the end of 2021 and under $200 million in 2019. The Stockholm-based team headed by Pozine bought a record number of new policies during a single month in August, with its portfolio consisting of over 480 life insurance policies.

The alternative investment fund has delivered an annualized return of 7.5 percent in U.S. dollars, exceeding its long-term target of seven percent per year. Ress Life Investments is up 7.2 percent over the first eight months of 2022. The fund’s management company has been reinforcing both its portfolio management team and sales team on the back of growing assets under management. “We are proud of what we have achieved since we launched Ress Life Investments in 2011,” comments Mårtenson. “Team Ress has grown to a total of nine people with complementary skills and diversity.”

Ress Hires as Assets Approach Milestone
11/11/2021

Stockholm (HedgeNordic) – With Ress Life Investments approaching $300 million in assets under management, its management company has been reinforcing both the portfolio management team and the sales team responsible for serving existing clients and onboarding new ones. Stockholm-based Resscapital has now expanded the sales team led by founder Jonas Mårtenson with the hiring of Emily Tranberg (pictured).

“Resscapital is pleased to announce that Emily Tranberg has joined our sales team,” announces the asset manager of Ress Life Investments, an alternative investment fund investing in the secondary market for US life insurance policies. “Since assets under management in Ress Life Investments continue to grow and are now approaching $300 million, we need to strengthen our team,” comments Mårtenson, founder and head of sales at Ress Life Investments.

“Since assets under management in Ress Life Investments continue to grow and are now approaching $300 million, we need to strengthen our team.”

Emily Tranberg has joined Resscapital from Nordnet Bank AB, where she worked as customer operations officer responsible for handling the bank’s client accounts, Know Your Customer (KYC) /Anti-Money Laundering (AML) measures and compliance within this area. She holds a bachelor’s degree in Business and Economics with a focus on management from Stockholm Business School at Stockholm University.

“I am very happy to have become a part of Resscapital and most grateful for the opportunity to work alongside such experienced, professional and cheerful colleagues,” Tranberg comments on joining the Resscapital team. “I already feel like a part of the team, having received a warm welcome right from the start. I am really looking forward to starting my journey with the company and to growing together with them.”

“I am very happy to have become a part of Resscapital and most grateful for the opportunity to work alongside such experienced, professional and cheerful colleagues.”

Ress Life Investments seeks to generate high single-digit returns uncorrelated to traditional asset classes by acquiring US life insurance policies on the secondary market. The alternative investment fund has generated an annualized return of seven percent in the past five years to reach its net-of-fees return target of seven percent in US dollars, with returns exhibiting a correlation of only 0.07 with the MSCI World and 0.04 with the S&P 500. According to Mårtenson, “an increasing number of investors are looking to diversify their risks with equity markets at an all-time high.” He goes on to emphasize that “the stable returns and low volatility in returns generated by Ress Life Investments can serve as an alternative to fixed-income investments.”

Positively Skewed Fixed-Income Alternative
09/11/2021

Stockholm (HedgeNordic) – Many Americans rely on life insurance policies as a critical safety net to ensure the economic security of their families through the loss of a loved one, and most often, the primary breadwinner. However, most policies never pay out since policy owners stop paying premiums and allow their policies to lapse.

Older policy owners that have kept their policies have been increasingly opting to sell their policies to third parties in the secondary market for life insurance policies for an amount greater than the policy’s cash surrender value but less than the expected payout to the beneficiary upon the policy owner’s death. This secondary market exploits an inefficiency that enables both policy owners and third parties to achieve a mutual economic benefit. An alternative investment fund, Ress Life Investments, run by Resscapital’s Stockholm-based team has been snapping up such policies in the U.S. secondary market for life settlements since 2011.

“In our view, long longevity in itself is not a risk, the biggest risk comes from how our fund managers are able to estimate and control longevity risk.”

The success of a life settlements strategy requires accurate estimates of longevity. “In our view, long longevity in itself is not a risk, the biggest risk comes from how our fund managers are able to estimate and control longevity risk,” explains Jonas Mårtenson (pictured), the founder of Resscapital. “We have to make sure that our portfolio managers actually understand longevity and understand how to mitigate the risk by selecting lower-risk policies that still provide an attractive return.”

Resscapital’s approach to mitigating longevity risk involves buying policies from healthy retirees with long life expectancies and choosing conservative estimates of life expectancies. “For us, the name of the game is to buy policies with long life expectancies, based on conservative estimates,” Mårtenson tells HedgeNordic. “We require at least two estimates of life expectancies when buying policies, and we try to be very cautious by working with niche medical underwriters that tend to provide somewhat conservative, longer life expectancies,” he continues. Resscapital’s risk-aversion has resulted in more policies paying out than expected in recent years, providing a boost to the fund’s performance.

Positively Skewed Fixed-Income Alternative

Ress Life Investments has generated an annualized return of 7 percent in the past five years, just in line with its return target of 7 percent net of fees in U.S. dollars. “The fund is completely uncorrelated from equities, fixed income and other asset classes, because the main risk we take is longevity,” explains Mårtenson. Over the past five years, Ress Life Investments has exhibited a correlation of 0.07 with the MSCI World and 0.04 with the S&P 500. “It is very difficult to find investments that are quite uncorrelated to the major asset classes.” With an annualized return of 7 percent in the past five years, Mårtenson views Ress Life Investments as a perfect alternative for fixed-income investments.

“The fund is completely uncorrelated from equities, fixed income and other asset classes, because the main risk we take is longevity.”

“This is a high-yielding fixed-income replacement with a very high credit quality,” says the Resscapital founder. “We have policies issued by close to 60 different U.S. life insurance companies with a minimum rating of A-,” he continues. “Although the credit risk that we take on U.S. life insurance companies is real, there are no known cases in the United States when policy beneficiaries did not receive death benefits,” says Mårtenson. “A life insurance policy will pay out even if the life insurance company goes bankrupt. Bankruptcies have happened many times in the past, but the actual portfolio of life insurance policies from a bankrupted insurance company may then be sold to another life insurance company. The death benefits have always been paid out.”

“From a diversifying point of view, this is a great counter-cyclical allocation to most other investments.”

Although Ress Life Investments represents an alternative to fixed-income allocations, its return characteristics differ from those of equity, fixed-income or other investments. “Ress Life investments is not only uncorrelated, but also exhibits return characteristics that are very different,” argues Mårtenson. The fund tends to exhibit a distribution of returns that is positively skewed. “About 70 percent of monthly returns are positive and 30 percent are negative. But if you look at the way our performance is derived, we have periods of very flat performance just like this year where nothing much happens,” says Mårtenson. “But when the policy pays out, the net asset value will increase quite a lot, which is an interesting and somewhat unique return characteristic. From a diversifying point of view, this is a great counter-cyclical allocation to most other investments.”

Inflation

With inflation dominating investing conversations so far this year, Mårtenson still views his team’s life settlements strategy as an attractive alternative in an inflationary environment. “Since we are delivering a nominal return, increasing inflation does have a negative effect because our returns may become less attractive. Also, of course, the big policy payouts in many years to come would also be affected by inflation,” acknowledges Mårtenson. “On the other hand, we would also pay less relatively speaking in premiums. We have the cash outflows in the form of premiums, which are becoming worth less and less because of inflation.”

“Compared to a bond strategy, we are less affected by interest rates shifts,” argues Mårtenson. “We are picking up quite a lot of extra yield if we buy policies at an expected IRR of 12 percent in U.S. dollars in spite of inflation. There is quite a big cushion here,” he adds. “If we can deliver on our target return of 7 percent or even higher, that is still attractive versus many other fixed-income strategies even in an inflationary environment.”

Ideal Portfolio Size

Ress Life Investments gained 2.8 percent in the first nine months of 2021 after booking a gain of 7.2 percent last year, about 8.0 percent in 2019 and a record 9.9 percent in 2018. “The performance is lower than expected so far because we only had a few policies paying out this year,” explains Mårtenson. “The portfolio is still rather small with approximately 400 policies, so we still see periods of time when fewer policies pay out,” he continues. “Even a 12-month period is quite a short timeframe.”

“A portfolio of 1,000 policies could provide a much more stable and less volatile performance.”

“A portfolio of 1,000 policies could provide a much more stable and less volatile performance,” argues Mårtenson. Its $282 million in assets under management are currently invested in over 400 policies with a total face value exceeding $1 billion. “We have had record buying in the last 12 months, with the team buying probably around 100 new policies in the last year. So our aim is to continue to increase the portfolio and generate similar but more stable performance for our investors.”

Tertiary Market Journey

In addition to the mature and growing secondary market for life insurance policies, the so-called tertiary life settlement market, which enables the purchase and sale of larger portfolios of life policies, has also become more active. Resscapital is now planning the launch of a “closed-end fund investing in the tertiary market for larger institutional investors in 2022.” According to Mårtenson, “the fund is going to be much more like a private equity fund, a 10-year closed-end fund with minimum ticket sizes probably around $25 million.”

“We will be launching a closed-end fund investing in the tertiary market for larger institutional investors in 2022.”

Stockholm-based Resscapital has all the ingredients needed for successfully navigating and investing in the tertiary market. “We have built a great ten-year track record, we understand and have deep knowledge of the asset class, and we are a well-established player,” says Mårtenson, who is the only non-U.S. board member at the Institutional Life Markets Association (ILMA). “We have also developed our own internal portfolio management systems that enable us to filter and review large quantities of data. All our systems and portfolio management are well adapted for the launch.”

 

This article featured in HedgeNordic’s “Diversification” publication.

Ress Strengthens Team
10/03/2021

Stockholm (HedgeNordic) – Ress Capital is expanding the portfolio management team that runs its alternative investment fund focused on U.S. life insurance policies. With assets under management growing, Markus Biamont has joined the team running Ress Life Investments as a Junior Portfolio Manager.

“We are pleased to announce that Markus Biamont has joined Ress Capital as a Junior Portfolio Manager,” writes Ress Capital in a press release. “Since assets under management have now reached 245 million U.S. dollars, the portfolio management team is expanding,” adds the press release. “Markus will support the senior portfolio managers Anton and Fredrik in the policy sourcing and selection process.”

“We are pleased to announce that Markus Biamont has joined Ress Capital as a Junior Portfolio Manager.”

Biamont joined Ress Capital from Nordea Bank, where he worked as an analyst focused on treasury and liability asset management. In his role, he developed and maintained quantitative models used for asset liability management. Biamont holds a Master of Science degree in Industrial Engineering and Management from the Linköping Institute of Technology in Sweden, where he specialized in computer science and finance. Biamont will support Ress Capital’s Head of Portfolio Management, Anton Pozine, and portfolio manager Fredrik Thor in the policy sourcing and selection process.

“Since assets under management have now reached 245 million U.S. dollars, the portfolio management team is expanding.”

Ress Life Investments, recognized as the Best Nordic Hedge Fund of 2019 by HedgeNordic, is an alternative investment fund seeking uncorrelated returns by investing in the secondary market for U.S. life insurance policies. Living owners of life insurance policies sometimes sell their policies on the secondary market for a lump sum of money to relieve themselves of the obligation to keep up with premium payments. Life settlement investors such as Ress Life Investments pay that lump sum and maintain the policy premiums to collect the contract’s payoff upon the insured’s death.

Because longevity – the main risk factor in a life insurance portfolio – is uncorrelated to traditional asset classes, Ress Capital’s strategy of investing in the secondary life insurance market has exhibited minimal correlation to other asset classes and financial markets in general. Ress Life Investments has delivered an annualized return of 8.1 percent in the past three years through the end of January this year. The strategy’s returns since inception have exhibited a correlation of only 0.07 with the MSCI World.

 

Picture by Patricia Castillo / Eriksbergsfoto

One Replacement for Fixed Income
16/12/2020

Stockholm (HedgeNordic) – Fixed income has long been serving as an essential asset allocation component within most diversified portfolios. Amid historically low interest rates, buy-and-hold investors though are almost guaranteed to collect microscopic returns from this asset class over the years to come. A well-diversified portfolio of U.S. life insurance policies may provide investors with a better risk-reward alternative to fixed income, able to offer equity-like returns with volatility below that of investment-grade bonds.

“A well-diversified portfolio of life settlements that can achieve seven to eight percent net in U.S. dollars is a really attractive alternative fixed-income proposition,” believes Jonas Mårtenson, the founder of an alternative asset manager running a fund focused on U.S. life insurance policies. “We will likely never generate 20 percent in one single year and will probably not generate negative returns in a calendar year either,” continues Mårtenson. “For us, this is a long-term investment that acts as an alternative to buying private debt or other asset classes that have to go for lower credit ratings in order to achieve higher returns.”

“A well-diversified portfolio of life settlements that can achieve seven to eight percent net in U.S. dollars is a really attractive alternative fixed-income proposition.”

Ress Life Investments, Resscapital’s vehicle that was recognized as the Best Nordic Hedge Fund of 2019 by HedgeNordic, screens for unwanted life insurance policies from healthy and wealthy policy owners in their seventies with an average life expectancy of ten years. “The secondary market offers an alternative to policy owners to sell their policies at a higher cash value than the surrender value offered by the issuing insurance companies,” explains Mårtenson. After buying a life insurance policy in the U.S. secondary market for these policies, funds such as Ress Life Investments step in and continue to pay the due premiums until the death of the insured, resulting in the contract’s payoff.

“The secondary market offers an alternative to policy owners to sell their policies at a higher cash value than the surrender value offered by the issuing insurance companies.”

The purchase of a life insurance policy generates a return if the discounted value of the expected future benefits of the policy exceeds the present value of all expected premium payments to be made and the cost of acquiring the policy. “The key risk we take, of course, is the longevity risk,” emphasizes Mårtenson. “The fact that people are living longer in the Western world is a well-known fact, we know that, everyone knows that,” he continues. To mitigate the longevity risk, the investment team at Ress Life Investments led by Anton Pozine predominantly seek to buy policies from people with longer life expectancies.

“We buy policies from people who are very healthy, because we think that long life expectancies are more accurate,” points out Mårtenson. “The only thing we care about is having accurate life expectancies.” Ress Life Investments also seeks to mitigate the impact of longevity risk by buying single policies. “We are cherry picking, only having bought approximately 400 policies since inception having reviewed over 10,000 policies,” says Mårtenson. “We are buying very selectively, trying to buy policies where we feel the risk is lower for our investors and by lower risk, we mean lower sensitivity to an increase in life expectancies.”

“We are cherry picking, only having bought approximately 400 policies since inception having reviewed over 10,000 policies.”

Because longevity – the main risk factor in a portfolio of life insurance policies – is mostly uncorrelated to economic cycles and traditional asset classes, Ress Life Investments not only acts as an alternative to fixed income but also as a true diversifier within a portfolio. “This is a very interesting asset class that offers completely uncorrelated returns, which is difficult to find for investors in these days,” says Mårtenson. “The low volatility and predictable cash flows of a well-diversified life insurance portfolio offer a highly attractive, asymmetric risk profile, well-suited to fixed-income investors prioritizing capital preservation.”

“This is a very interesting asset class that offers completely uncorrelated returns, which is difficult to find for investors in these days.”

An Example of Socially Responsible Investing

There are rational economic reasons for policyholders to sell their life insurance policies. “Our life settlements transactions start with policy owners who no longer want or need their policies,” says Cristina Lugaro of Resscapital. Some policy owners see no need for their life insurance policies and decide to stop paying the premiums. “This is actually the most common alternative, people just stop paying the premiums and the policies lapse within 60 days,” says Mårtenson. “Nine out of ten policies in the U.S. will lapse without paying out. For life insurance companies, this is a very profitable product since most policies never pay out.”

It is financially beneficial to policy owners to sell their policies to a third party rather than surrender them to life insurance companies. “We really think that buying life settlements is a sustainable investment, which provides value to both the sellers and also the buyers in this case,” argues Lugaro. “Policy owners are getting value by having the opportunity to sell policies on the secondary market.”

“We really think that buying life settlements is a sustainable investment, which provides value to both the sellers and also the buyers in this case. Policy owners are getting value by having the opportunity to sell policies on the secondary market.”

Without a secondary market for life settlements, policy owners could either let their policies lapse and get nothing, or get a symbolic surrender value from insurance companies. “The strategy of buying unwanted life insurance policies is very positive and sustainable because it is adding value to consumers,” says Lugaro. “The secondary market is also disrupting a market where the insurance companies have the absolute pricing power over the policies,” she continues. “Owning a policy is like owning financial assets such as equities, bonds, or real estate,” adds Lugaro. “You have the right to sell it if you don’t need this protection anymore, and maybe put the money into something you need now, in other things like long-term healthcare, for example.”

Is Covid-19 Making Policies More Profitable?

One ethical consideration raised by investors includes the impact of the coronavirus pandemic on policy owners and the possible premature payouts from the most unfortunate victims of the pandemic. “One would think that the coronavirus will increase the mortality rates and trigger faster payouts, which would be unethical because it is taking advantage of these people who are dying,” says Lugaro. “But that is not the case in our portfolio,” she claims. “We tend to acquire policies from quite healthy and wealthy individuals who have access to healthcare, who are quite well-informed and likely to embrace social distancing measures,” says Lugaro. “We have not seen a major impact of the COVID-19 pandemic on our portfolio.”

High Barriers to Entry

Life settlements investing may sound simple and lucrative for investors, but this approach to investing is not quite that simple. According to Mårtenson, the secondary market for life insurance policies is associated with high barriers to entry. “The secondary market is very much an OTC market where you are relying on finding good policies through brokers,” says Mårtenson. “If you are an unknown market participant, you don’t know the brokers and you don’t know which brokers have access to attractive policies, you may find yourself in a rather difficult position.”

“If you are an unknown market participant, you don’t know the brokers and you don’t know which brokers have access to attractive policies, you may find yourself in a rather difficult position.”

A new portfolio of single life insurance policies is also associated with a so-called J-curve effect, which describes the initial loss-making period that precedes the first policies paying out. “You own zero policies when launching, so your portfolio is not very diversified at the beginning,” says Mårtenson. “You do not expect any policies to pay off in the early years, so there is a J-curve effect as it takes time to build a diversified portfolio,” he continues.

“You do not expect any policies to pay off in the early years, so there is a J-curve effect as it takes time to build a diversified portfolio.”

“The fund was started in 2011 and only had $10 million in assets under management,” says Lugaro. “It took some time for the first policies to pay out and building that portfolio, which currently oversees $223 million, contains 335 policies and is well-diversified by different parameters.” Other barriers to entry, less visible to the naked eye, include the expertise and experience required to operate in this secondary market for life settlements. “It is a lot of admin work and a lot of knowledge required to operate,” points out Mårtenson. “The market is associated with high barriers of entry, and not easy for newcomers to join.”

“The market is associated with high barriers of entry, and not easy for newcomers to join.”

“This secondary market is still quite a small niche,” says Mårtenson, enabling Ress Life Investments to defend against larger players with significantly higher amounts of dry powder. “The annual volume is approximately $5 billion and it is growing steadily,” he continues. “More participants, more buyers, and lots of new funds are being set up. But since the market is still quite niche, it is very difficult for large players to buy single policies.”

No Flatlines for Ress Life
20/08/2020

Stockholm (HedgeNordic) – Ress Life Investments has just reached $200 million under management for the first time, successfully building a well-diversified portfolio of life insurance policies that pays off enough to achieve its return objective of 7-8 percent per annum time and time again. “We buy life insurance policies and they pay out randomly during the whole year,” says Cristina Lugaro of Resscapital. The portfolio, however, is large and well-diversified to cover for the annual return objective.

After returning shy of one percent in the first five months of 2020, Ress Life Investments gained 1.3 percent in June and an additional 4.2 percent in July to bring the year-to-date performance to 6.3 percent. “The Ress Life Investments fund is performing as expected,” Lugaro tells HedgeNordic. “We can have flat performance for a few months until a policy pays out and performance goes up,” she explains. The strong performance in July, the fund’s second-best month on record, was mainly attributable to large policies paying out.

“We can have flat performance for a few months until a policy pays out and performance goes up.”

Cristina Lugaro

Living owners of life insurance policies sometimes sell their policies on the secondary market for a lump sum of money to relieve themselves of the obligation to keep up with premium payments. Life settlement investors such as Ress Life Investments pay that lump sum and maintain the policy premiums to collect the contract’s payoff when the original policy owner dies. Because longevity – the main risk factor in a life insurance portfolio – is uncorrelated to traditional asset classes, Resscapital’s strategy of investing in the secondary life insurance market has exhibited minimal correlation to other asset classes and financial markets in general.

“The beginning of 2020 had been rather normal and has demonstrated the uncorrelated nature of our strategy.”

Although few policies paid out in the first half of the year, “the beginning of 2020 had been rather normal and has demonstrated the uncorrelated nature of our strategy,” Cristina Lugaro, Institutional Sales at Resscapital, tells HedgeNordic. “Given that the Ress Life Investments fund is sufficiently large and has reached a good level of diversification, we expect that payouts will cover for our annual return of 7-8 percent in USD,” she comments on the fund’s return objective, which is on track to be reached for a third consecutive year. “We expect to deliver our return target during the remainder of the year,” says Lugaro. “Given that there are still five months left to year-end, it is also possible that we exceed our target return as more policies pay out.”

AuM Milestone and Growth Plans

After passing $100 million under management in late 2018, seven and a half years from its launch, Ress Life Investments has doubled its assets under management in approximately two years. “We are very pleased about the fund reaching the $200 million-milestone and excited about the increasing interest from investors in the asset class,” Lugaro comments. “We believe that our long-term commitment to this market and know-how have been essential to our success.”

“We are very pleased about the fund reaching the $200 million-milestone and excited about the increasing interest from investors in the asset class.”

Despite the increase in assets under management, Ress Life Investments has plenty of capacity for new investors. “We currently have plenty of capacity and believe we can grow the assets to $500 million while maintaining the same investment strategy,” says Lugaro.

“We currently have plenty of capacity and believe we can grow the assets to $500 million while maintaining the same investment strategy.”

The fund’s strong performance and subsequent increase in assets under management enable the team to spend on developing and growing its business. “We expect to grow organically and increase our resources along the way,” Lugaro tells HedgeNordic. “As we grow, we plan to add people to the investment team, support functions and marketing and sales so that we can serve our growing client base and continuously improve our investment process.” Resscapital is also considering the launch of a closed-end fund for larger institutional investors.

The Investors Choice
20/07/2020

Stockholm (HedgeNordic) – From the eight Nordic hedge funds recognized as “Top Performer” winners at the Investors Choice Awards 2020 in the EMEA region, only Ress Life Investments went on to win an “Investors Choice” award. “This award gives us recognition for our long-term commitment to the asset class in which we have built a solid track record since the fund’s inception in 2011,” Cristina Lugaro (pictured right), Institutional Sales at Resscapital, comments on the distinction.

The “Top Performer” winners, which were announced earlier this summer, competed for the “Investors Choice” awards in their respective categories. The fund managed by Stockholm-based specialist boutique hedge fund manager Resscapital was recognized for long term performance in a “Specialist” category that featured Rhenman Healthcare Equity L/S and four other “Top Performer” winners in contention for the “Investors Choice” award.

The shortlisted funds for the Investors Choice Awards – recognized as “Top Performer” winners – are selected purely based on quantitative risk-adjusted returns. The “Long-Term” award categories, one of which was won by Ress Life Investments, cover the period from January 2017 to April 2020. The winners of the Investors Choice Awards, meanwhile, are determined by a jury board of institutional investors that scores the “Top Performers” on a range of qualitative criteria, including investment processes, risk framework, transparency, team and ability to generate alpha.

Ress Life Investments, which buys life insurance policies in the United States in the secondary market for these policies, has also been named the “Best Nordic Hedge Fund” and “Best Nordic Multi-Strategy Hedge Fund” at this year’s edition of the Nordic Hedge Award. The fund overseen by Anton Pozine (pictured center), Head of Portfolio Management, delivered an annualized return of about seven percent in the past 36 months through the end of June. “During the last five years, the volatility of the fund has been only four percent and the risk-adjusted return, measured by the Sharpe ratio, is an excellent 1.4,” emphasizes Lugaro. “We believe that being an established player that selectively purchases policies will reduce risks and increase returns for our investors,” she continues. Ress Life Investments currently oversees about $190 million in assets under management.

Ress Life Investments was up two percent in the first half of 2020 and was flat to marginally positive in the first quarter of the year. Resscapital’s strategy of investing in the secondary market for U.S. life settlements exhibits no correlation to traditional asset classes. The fund has been immune to the broader market volatility triggered by the COVID-19 pandemic and its socio-economic consequences. As Jonas Mårtenson (pictured left), the founder of Resscapital, previously told HedgeNordic, “the main risk factor in a life insurance portfolio – longevity – is fundamentally uncorrelated to other major asset classes.”

Best Nordic Hedge Fund Overall 2019
22/04/2020

Stockholm (HedgeNordic) – The title for the “Best Nordic Hedge Fund” rewards the best fund in the Nordic hedge fund universe across all categories. Undeniably, this award is the crown jewel handed out at the Nordic Hedge Award and is likely the most desired recognition in the Nordic hedge fund industry. At this year’s Nordic Hedge Award, Ress Life Investments came out on top, securing the title for the “Best Nordic Hedge Fund Overall” award, along with the “Best Nordic Multi-Strategy Hedge Fund.”

Winner: Ress Life Investments

From left to right: Jonas Mårtenson, Anton Pozine and Cristina Lugaro (Resscapital).

“Fantastic!,” says Jonas Mårtenson, the founder of Resscapital. In a comment on the distinction, Mårtenson tells HedgeNordic that the award “is a Grand Slam for the company and the whole team.” Ress Life Investments, an alternative investment fund investing in the secondary market for U.S. life insurance policies, is a new name on the list of winners in the main award category. “This award gives us recognition for our long-term focus and established presence in our niche market,” adds Mårtenson.

Resscapital’s approach to investing in life insurance policies seeks to deliver an annual return of seven percent after fees over time with limited correlation to traditional asset classes. As “the main risk factor in a life insurance portfolio – longevity – is fundamentally uncorrelated to other major asset classes,” Ress Life Investments has successfully managed to deliver solid and uncorrelated returns to investors. In the past three years through the end of 2019, the fund overseen by Anton Pozine, Head of Portfolio Management, delivered an annualized return of over eight percent.

According to Mårtenson, the two trophies collected by Ress Life Investments “give recognition for the whole team, in particular for our two portfolio managers,” Anton Pozine and Fredrik Thor. “Anton Pozine has done a tremendous job since inception in 2011 when he started managing the Ress Life Investment fund, his dedication is greatly appreciated by us and our investors,” says Mårtenson. “Fredrik Thor joined us last year and, with his long investment experience, has greatly contributed as well in supporting our accelerating growth.”

Mårtenson and his team at Resscapital have also expressed their appreciation for the commitment of their investors. “We are very grateful to our all investors for the trust they have given us,” says Mårtenson. “This award would not have been possible without the commitment of our long-term Swedish institutional investors that dared to think differently and believed in our team and the potential of our strategy in the early days.” The team at Resscapital aims to “continue to deliver uncorrelated risk-adjusted returns during many years and consolidate our position in the alternatives space.”

Second place: Accendo Capital

Mark H. Shay, Senior Partner at Accendo Capital.

Activist investor Accendo Capital stands on the podium in the “Best Nordic Hedge Fund Overall” category for the third time in the previous four editions of the Nordic Hedge Award. Accendo, an activist fund that maintains a very focused portfolio of predominantly small- and mid-cap companies from Northern Europe, was among last year’s best performers in the Nordic hedge fund industry with a full-year return of about 46 percent.

“It is gratifying to be recognized for excellence among our many outstanding peers and to be featured in HedgeNordic, the leading media platform for Nordic alternative investments and a team that really covers the space well,” Elise Auer, Director of Investor Relations at Accendo, tells HedgeNordic. High portfolio concentration is usually accompanied by elevated volatility in returns, but short-term fluctuations are not on the Accendo team’s minds. Henri Österlund, who manages the fund alongside Mark H. Shay and Kai Tavakka, recently told HedgeNordic that the main focus is “to find the best ideas and actively engage with those investments to make sure they become solid investments in the long term.”

High concentration can be equally good or bad for fund performance in the shorter term, but can lead to outperformance over the longer term if targeted improvements are combined with good stock selection. “Our activist, high-conviction approach involves holding a concentrated portfolio of Nordic listed, technology-focused small-cap companies for many years,” explains Auer. “While many funds use portfolio diversification as a risk management tool, our approach is to deal with risk at the company level through active engagement, foresight, shareholder focus, and helping our companies allocate capital rationally and efficiently.”

Accendo Capital has delivered an annualized return of about ten percent since launching in early 2008, managing to provide annual returns of over 20 percent in six of the past 12 years. Accendo recorded its second-best yearly performance on record last year. “We think long-term with our investments, and it is great to have investors on board who share the same objectives,” Auer said earlier this year.

Third Place: Rhenman Healthcare Equity L/S

From left to right: Henrik Rhenman and Susanna Urdmark (Rhenman & Partners Asset Management).

Rhenman Healthcare Equity L/S, this year’s winner of the “Best Nordic Equity Hedge Fund” award, takes the third spot on the podium in the “Best Nordic Hedge Fund Overall” category. The healthcare-focused long/short equity fund managed by Henrik Rhenman and Susanna Urdmark stands on the podium in this category for the fourth time.

“The Nordic Hedge Award is a great thing to receive and be nominated for,” founder and CIO Henrik Rhenman said at a previous Nordic Hedge Award event. “It is the most prestigious award in the Nordic region, and there is no comparison,” he added. With 13 awards under its belt, Rhenman Healthcare Equity L/S has collected the highest number of trophies over the eight editions of the Nordic Hedge Award.

Rhenman Healthcare Equity L/S has generated an annualized return of about 17 percent since launching more than ten years ago. The Stockholm-based fund is one the best performing hedge funds in the Nordics, thanks to its high net exposure to the global healthcare and biotech sectors over time. “In our specific case, we have had a positive view on the health care sector since the fund started in June 2009,” founding partner Carl Grevelius previously told HedgeNordic. “We believe innovation is a great investment opportunity and we have, therefore, made a very conscious decision to have a high net exposure on a fund level and accept the volatility that it brings.”

 

The “Best Nordic Hedge Fund Overall” award category was supported and presented by CME Group.