Skip to Content

Uncorrelated Returns in Uncertain Times: The Stability of Life Settlements with AIR Asset Management

In an era marked by rapid economic changes, savvy investors are increasingly seeking refuge from traditional markets in alternative investments. The demand for stability and diversification has led many to explore alternative investments such as life settlements. Unlike traditional stocks and bonds, the performance of these alternative strategies is not directly impacted by global economic shifts, including fluctuating interest rates, inflationary pressures, and uncertainties in the global market landscape.

What are life settlements? A life settlement is a financial transaction where an individual sells their existing life insurance policy to a third party for a value that exceeds the cash surrender value but is less than the death benefit. The buyer then becomes responsible for the policy’s premium payments and, ultimately, receives the death benefit when the insured passes away.

This type of investment is compelling because it transforms an otherwise illiquid asset into a tradable commodity, offering policyholders a financial option that might not otherwise be available. For investors, life settlements provide access to returns that are not tied to the economic cycles that traditional investments follow. Instead, the primary factors influencing their returns are the life expectancy of the insured individual, the premiums paid, and the death benefit. This means they offer a way to achieve portfolio diversification with uncorrelated returns, which is particularly attractive in uncertain economic times.

One firm that helps guide investors when it comes to such non-traditional opportunities is . Since 2014, under Richard Beleutz’s leadership, AIR has grown to manage approximately $730 million, focusing on life settlements, annuities, and private credit. AIR’s innovative niche strategies seek to provide its investors with attractive total returns while preserving capital.

Since 2017, the life settlement market has seen a significant influx of capital. Investors, still eager to break into the life settlement market, view it as a strategic move to diversify away from the traditional confines of stocks and bonds. The life settlement space offers a unique proposition: it holds the potential for stability akin to bond investments while also offering the prospect of higher returns typically associated with equity investments. This dual advantage has contributed to the sustained interest and investment in life settlements as a distinct asset class that can balance an investment portfolio.

The allure of life settlements is their ability to generate yield independent of traditional market pressures. The historical data suggests that life settlement investments display admirable steadiness while the S&P 500 experienced downturns. In addition, interest rates and cuts–such as the between March 2022 and July 2023 and the projected reductions anticipated in 2024–ordinarily sway traditional investments. However, the value of life settlement investments is not tied to the ebbs and flows of economic indicators, but to life expectancy projections, which provide a cushion against market volatility and interest rate movements.

While life settlements can be financially beneficial, they also raise important social considerations. Life settlements can provide the policyholder with much-needed liquidity, which can be particularly valuable if the policyholder’s circumstances have changed since they first took out the policy. For example, if the original reason for the policy (such as providing for dependents) no longer applies, the policyholder may prefer to have access to the funds during their lifetime. Another common example may be that the policyholder is seeking funds to help pay for everyday expenses in retirement, such as long-term care.

It’s noteworthy that approximately do not result in a death benefit payout. This high percentage is predominantly due to policyholders outliving the terms of their policies or because they choose to forfeit their policies before an insured event occurs.

suggest that each year through 2027, life insurance policies with a cumulative value exceeding $200 billion will likely be surrendered or allowed to lapse. There’s also been a noticeable increase in the number of lapsed policies, from . For policyholders contemplating lapsing or surrendering their life insurance, life settlements present a viable alternative. Redirecting a portion of these otherwise inactive policies into life settlements could translate into a significant redirection of funds, putting them to active use in ways that enhance lives. For the investor community, such a shift signals a latent opportunity for both financial growth and meaningful societal contribution.

Beleutz is strongly committed to innovation as he has guided the company to its current status, blending ethical considerations with financial expertise to . AIR Asset Management’s experienced team of professionals serves an investor base of institutional investors, registered investment advisers, single and multi-family offices, and high-net-worth investors. This SEC-registered hedge fund management firm is based in Chicago.

With the global markets facing many uncertainties, life settlements offer investors a diversified and risk-adjusted pathway to returns. ‘s offerings, particularly its flagship multi-strategy that invests in life settlements, life-contingent annuities, and private credit, have shown to be a stable investment alternative amid market volatility. As AIR navigates the dynamic economic currents, it remains dedicated to its mission: to empower investors through innovative, niche strategies that generate uncorrelated returns and preserve capital.