The Gold Coast-based Life Settlements Wholesale Fund, in which VFMC is an investor, was optimistic about its chances of outperformance over the coming months, as the Australian dollar fell back to what looked like a semi-permanent home around US65 cents. The Australian dollar position at near parity with the US for most of last year has been disastrous for the Life Settlements fund. It returned -5.87 per cent in 2007/08.
The fund purchases US life policies at a discount to their payout, pays the premiums until the policyholder dies, and then collects the full face value of the payout from the insurer. The funds’ performance unit price is related to an ongoing actuarial assessment of the underlying policies’ ‘time to maturity’ against the ongoing cost of premiums, so the fund should keep on performing, even in a financial crisis.