Performance and Risks of Open-End Life Settlement Funds

Item Type Journal paper
Abstract In this paper, we comprehensively analyze open-end funds dedicated to investing in U.S. senior life settlements. We begin by explaining their business model and the roles of institutions involved in the transactions of such funds. Next, we conduct the first empirical analysis of life settlement fund return distributions as well as a performance measurement, including a comparison to other asset classes. Since the funds contained in our dataset cover a large fraction of this relatively young segment of the capital markets, representative conclusions can be derived. Even though the empirical results suggest that life settlement funds offer attractive returns paired with low volatility and are virtually uncorrelated with other asset classes, we find latent risk factors such as liquidity, longevity and valuation risks. Since these risks did generally not materialize in the past and are hence largely not reflected by the historical data, they cannot be captured by classical performance measures. Thus, caution is advised in order not to overestimate the performance of this asset class.
Authors Braun, Alexander; Gatzert, Nadine & Schmeiser, Hato
Journal or Publication Title Journal of Risk and Insurance
Language English
Keywords Life Settlements, Open-End Funds, Performance Measurement, Risk Analysis
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date March 2012
Publisher Wiley-Blackwell
Place of Publication Malden, Mass.
Volume 79
Number 1
Page Range 193-230
Number of Pages 38
ISSN 0022-4367
ISSN-Digital 1539-6975
Publisher DOI
Depositing User Dr. Caroline Siegel
Date Deposited 20 Nov 2009 13:34
Last Modified 22 Mar 2023 01:20


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Braun, Alexander; Gatzert, Nadine & Schmeiser, Hato (2012) Performance and Risks of Open-End Life Settlement Funds. Journal of Risk and Insurance, 79 (1). 193-230. ISSN 0022-4367

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