March, 2010

Life Settlement Investment Strategy

Life settlement investing involves the purchase of life insurance policies from insureds who decide they no longer want or need the policies. Under this strategy, a life insurance policy is purchased from an insured, typically for more than the cash value of the policy, with the buyer assuming payment of the premiums and ultimately collecting the death benefit upon the insured’s passing. A life settlement portfolio is constructed of hundreds of such policies with a variety of life expectancies so as to provide some consistency of return.

We at Matrix actively seek to make client allocations to asset classes that provide returns with little or no correlation to the stock and bond markets, and we find the life settlement sector to be one of the most attractive non-correlated strategies. We made our first allocation to the life settlement category in 2010 with a firm that was backed by a well-respected venture firm that we knew. The Fund had assembled a talented team of life insurance experts and included a third-party service provider that provided medical underwriting capabilities to the industry. We were also drawn to the fact that the founder and management had invested over $40 million of their own money to start the fund. Since our original investment six years ago, this fund has produced positive annual returns every year, ranging from 7.6 % to 17.3%, with an average annual net return of 11.4 % over the period.