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pensions exec markets life-policy ABS
Jame DiBiasio ,
July 25, 2003
is introducing a guaranteed bond to Asian institutions based on senior
life insurance settlements.
Humphreys, the man who spearheaded HSBC's successful Mandatory Provident
Fund business in Hong Kong before retiring last year, has co-founded an
investment management firm specializing in alternative investments in the
form of asset-backed securities (ABS) and collateralised debt obligations
(CDOs). The firm, NewHaven Capital, is now marketing its first
asset-backed bond to Asian institutional investors based on senior life
other co-founders include CEO Alistair McLeod, who has served as CEO at
VIG Capital Management as well as at Emirates Bank International, Bank of
America, HSBC and Alliance & Leicester Giro Bank; managing director
Daryl Evans from VIG Group; and executive director Ben Daniel, who had set
up his own consulting firm Esone following a career in corporate finance.
is teaming up with Seabury Advisors, a California-based investment bank,
to acquire the legal rights to life insurance policies in the United
States, usually from individuals that are at a highly advanced age and
would like an immediate cash payment in their final years, rather than see
the life policy go to their estate after their death.
NewHaven is partnering with a Chinese securities company (which Humphreys
wouldn't name) that sells CDOs on the mainland. CDOs are asset-backed
securities on a diversified pool of financial assets such as bonds and
loans across the risk spectrum, sold to insurance companies, pension
funds, hedge funds and other institutions seeking higher returns.
partnership would let NewHaven help the PRC firm sell its CDOs overseas,
as well as help it get involved in NewHaven's senior life settlement
business. Humphreys declined to discuss this aspect further, as the
agreements with the partner are only at the verbal stage.
notes that securitizing senior life settlements is a $100 billion industry
in the US, with firms such as Berkshire Hathaway active in the market. But
internationally it hasn't caught on, and Humphreys believes NewHaven may
be the first manager to introduce this concept to many institutions in
also clarifies that NewHaven will not be involved in a similar activity
called viaticals, in which an investment firm buys life policies from
individuals with serious diseases such as AIDS, but which is also a big
industry in the US.
offers life-policy holders a lump sum of cash for the rights to their
policy. Then a special-purpose vehicle set up by Seabury in the state of
Delaware issues a zero-coupon bond using the policy receivables to pay at
maturity. NewHaven believes investors can achieve a compound annual return
of 7% on a three-year structure, and up to 10.5% for an eight-year note.
"This is quite useful for organizations like life insurance companies
and pension funds that need to guarantee some form of return,"
firm is now in the process of getting a rating for the bond, with the aim
of winning a AA- credit rating from Moody's Investor Service.
main risk for this kind of product is liquidity: there's no secondary
market for asset-backed bonds. Investors wanting early redemption would
require NewHaven to sell some of the underlying assets - and there is a
large market for policies in the US.
is presently in talks with four or five large Hong Kong-based institutions
considering investing. Humphreys' next marketing stop is Japan. The firm
hopes to launch its first senior life settlement ABS by the end of the
year, with a minimum of $60 million raised.