Dec ‘20 - Stocks Surge, Vaccine Available, the Search for Yield
THE INVESTMENT ENVIRONMENT - Stocks Surge, Vaccine Available, the Search for Yield
The S&P was up 10% in November, continuing a volatile year. Several companies announced positive results for vaccines against Covid 19, and in early December the UK government began administering the Pfizer vaccine to priority individuals.
While all positive news on the pandemic is welcomed, some have reservations. A vaccine typically takes up to ten years to develop and test properly; the Covid vaccines have been rushed through the process in less than 1 year. The Pfizer vaccine has announced their results in press releases but has not released the study for scientific peer review. The optimism remains tinged with uncertainties and unknowns.
New offerings in the bond market highlight how dangerous fixed income investing has become. Peru has offered a 101 year bond at 3.23%. The country is rich in history and culture, but political stability is not a strength. Of its last 9 Presidents since 1990, 6 are in jail or under investigation; the country has had 3 Presidents in less than a month. In 2017 Argentina offered a 100 year bond; it is already being restructured.
“More money has been lost reaching for yield than at the point of a gun” is the famous quote from Ray DeVoe Jr. For investors looking for a safe and reliable fixed income alternative with low credit risk and zero correlation to economic or political upheavals, a well managed portfolio of Life Settlements ticks all the boxes.
LAST MONTH IN THE LIFE SETTLEMENT MARKETS - Markets Stable; Money Lost Searching for Yield in Life Settlements
The secondary market remained stable in November with slightly subdued volumes and average IRR’s in the 12% to 14% range, with the usual significant dispersion around that range. Tertiary markets saw increased volume, at least in terms of large portfolios offered for sale, as a few open-ended Funds have become sellers.
As in all asset classes, investors in Life Settlements can lose money in the search for yield, and this appears to be the case with the Long Term Growth Fund, regulated in Luxembourg and managed by the Carlisle Group. It has been reported in the press that the LTGF has suspended redemptions and gated its open-ended Fund, as have at least two of its feeder funds in the USA. This has been expected for some time, as aggressive valuations were used to artificially inflate returns (and performance fees). Investors in the LTGF have been misled in the search for yield.
The greatest diamond heist in Europe took place in Luxembourg’s neighbour, Belgium, in 2003. The thieves in Antwerp stole over $100 ml of gold, silver, and diamonds, which were never recovered. Investors in $1.4 bn LGTF will likely lose more than that, proving Ray DeVoe Jr. right again.
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