Steve Luongo, CIO of AIR Asset Management, joins Keith Black, Managing Director of RIA Channel, to discuss the role of life settlements within a diverse investment portfolio, especially in times of volatile interest rates.
Life settlements, an investment vehicle where life insurance policies are purchased from those who can no longer afford them or no longer require coverage, offer a unique investment opportunity. The seller receives an immediate lump sum payment for their insurance policy, and the investor becomes the death benefit beneficiary. Life settlements are noted for their resilience to high-interest rates—a contrast to the usual volatility faced by traditional investment vehicles—since their value hinges on mortality rates rather than financial market trends.
The insured’s life expectancy is the critical determinant of a life settlement’s value, a factor uncorrelated with the ups and downs of interest rates, inflation, or economic downturns that typically affect stocks and bonds. This characteristic makes life settlements a compelling option for investors looking to add non-conventional assets with stable returns to their portfolios.
Often slotted into alternative investment or private credit portfolio allocations, life settlements are recognized for their historical consistent returns—ranging from low single digits to low double digits—and minimal volatility. For financial advisors keen to deepen their knowledge of this asset class, Steve Luongo’s comprehensive discussion is available for viewing on RIA Channel, offering insights into the strategic incorporation of life settlements in investment portfolios for a future-proof financial strategy.
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