Life Settlement Investments: AAP Life Settlement Index

Life settlement investments have been widely proclaimed as reliable and superior. The term "uncorrelated" is often used to describe their relationship to other markets. Is it so? Until recently there were no dependable points of reference except the claims of fund managers or others involved in the sale of life settlements. A Swiss investment firm, AA-Partners, has developed a life settlement index.

The new index, called the AAP Life Settlement Index, tracks open ended funds based outside the United States. The included funds' assets must be 75% or more invested in U.S. life insurance contracts. They must also be accepting new investors and allow at least quarterly redemptions. Net Asset Value (NAV) must be calculated in U.S. dollars and be publicly available or be given to the index. Another requirement for funds tracked by the index is that they can not be made completely of other funds. No more than 33% of any fund included in the index may be comprised of other funds.

For January 2009 the index showed a gain of 0.50%. The index is calculated monthly using the NAV of the component funds. The beginning value used is 100 based on values at the end of December 2006. If one of the component funds fails to provide its NAV then it will not be included in the calculation. The index is corrected if a member component issues a revised NAV. When a new fund is added or a component fund is dropped historical index values are not changed.

Revisions do happen. The original published data for January 2009 showed a December 2008 gain of 0.61% giving the year a 6.29% rise. December was later revised to a minus 1.43% and the annual gain for 2008 changed to 4.21%. While such a markdown may be alarming it also provides a measure of comfort to see such conscientiousness employed.

Investors will be able to use the index as a benchmark to gauge their own portfolios as well as the claims of marketers. While the index did slide at the end of 2008 it's decline was nowhere near the precipitous fall of the stock and bond markets. The index's worst month was the aforementioned December 2008. It's best month was January 2007 in which it rose 1.3%. Most months it has risen one half to three quarters of a percent.

Investors will be able to use the index as a benchmark to gauge their own portfolios as well as to authenticate the claims of marketers.
The calculation of the AAP Life Settlement Index is done by Structured Solutions AG At the end of each month. Distribution is through

Reuters (AAPLIFESETTLEM) and Bloomberg (AAPLIFE). The ISIN is DE000A0X7H31 and the WKN is A0X7H3. ISIN is the International Securities Identification Number developed by the ISO. The WKN is a one the kind identification number assigned to securities traded on the German stock exchange.

Sources:
AA-Partners Life Settlement Index

Structured Solutions

ISIN numbers defined at BusinessDictionary.com

Translation of WKN at ProZ.com