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LTG Fund Presentation 2015

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LTG Fund Presentation 2015

  1. 1. Private & Confidential 1 Luxembourg Life Fund Long Term Growth Fund Overview
  2. 2. Private & Confidential 2 Luxembourg Life Fund Long Term Growth Fund Overview Table of Contents. 3. About Us 6. What is a life settlement? 7. The industry 8. Asset Class Advantages 10. Market Future Outlook 13. Investment Strategy 14. Life Settlement Asset Variables 17. Benefits & Risks 23. Long Term Growth Fund 25. Our Management Team 29. Contact Us
  3. 3. Private & Confidential 3 Luxembourg Life Fund Long Term Growth Fund Overview About Us Why Carlisle Funds? Open-ended funds that seek to deliver above average market returns for investors through the life settlement asset class or secondary market for life insurance. Offers investors an actively managed life settlement fund strategy. Focused exclusively in our core competency, life settlements. Mark to Market Valuations through independent valuation service providers. Offer returns with minimum correlation to traditional financial markets. Why Life Settlements? The life settlement industry is one of the fastest growing sectors in financial markets today with 15 + consecutive years of positive growth. Life settlements have numerous advantages unique to the asset class including easy market entry, uncorrelated investment returns and low volatility.
  4. 4. Private & Confidential 4 Luxembourg Life Fund Long Term Growth Fund Overview Why Carlisle Funds? Our expertise and unique knowledge within the U.S. secondary life insurance market provides investors with a competitive advantage for three reasons: 1. We have a unique approach to how life settlement funds are managed. This is why we developed our funds from the ground up with best practices in mind. Mark to market valuations Independent accounting valuation and reporting Tax transparent and regulated investment structure 2. Our team has direct experience in every phase of the life settlement process allowing us to employ unparalleled risk and yield assessment. Experience: Our team has worked in every aspect of the secondary market including life settlement brokers, life settlement providers, and numerous life settlement funds. Efficient: Our intimate knowledge of life settlement sources allows us to acquire policies that meet and exceed quality standards at a fraction of our competitors’ costs. 3. Attractive risk adjusted yields derived from executing strong fundamental competency while mitigating risks during policy selection. About Us
  5. 5. Private & Confidential 5 Luxembourg Life Fund Long Term Growth Fund Overview Why Carlisle Funds? Fully regulated investment funds – Carlisle is a regulated fund management firm that works with regulated investment vehicles. Institutional Service Providers and Counterparties – Carlisle only works with approved institutional counterparties. Fully Tax Compliant – offering options for all types of tax situations in a compliant manner. Completely Transparent – Our investment vehicles are fully transparent and investors are free to perform all necessary due diligence. Independent Valuation – All valuations are performed by independent external valuation agents and audited periodically for compliance and accuracy. Mark to Market Valuation approach – Our valuation methodology provides investors with robust reporting of the fair market value of their investments. About Us
  6. 6. Private & Confidential 6 Luxembourg Life Fund Long Term Growth Fund Overview Background: A life settlement is the transfer of ownership and beneficiary rights of an unwanted or unneeded life insurance policy on an insured senior in exchange for a cash settlement. The seller no longer has the responsibility of paying future premiums. In exchange, investors profit based on the difference of the face value of the policy and acquisition and maintenance costs. Market Catalyst: Prior to life settlements, seniors who owned U.S. life insurance policies they no longer wanted, needed, or could afford were faced with either letting the policy lapse or surrendering the policy back to the insurance carrier for only a small cash value. The life settlement marketplace has provided consumers with a much needed option where they can receive substantially more than the cash surrender value. What is a Life Settlement? > ”By the end of 2010, total life insurance market in the United States was $18.4 trillion, an increase of 2 percent from 2009” -ACLI Life Insurers Fact Book 2011
  7. 7. Private & Confidential 7 Luxembourg Life Fund Long Term Growth Fund Overview Institutional Market: The secondary life insurance market today is dominated by institutional investors attracted by its continued expansion and uncorrelated investment returns. The increase in sophistication makes the market more efficient and has founded a positive evolution in the industry. Market Driver: Purchasing life insurance in the secondary market at a discount can produce attractive returns. The largest institutions globally are benefiting from the stability that diversified life settlement investments have brought to their portfolios. Tertiary Market: Due to its growth and number of participants, a tertiary market for life insurance has evolved within this industry, allowing institutional investors to buy and sell policies within the space. This tertiary market has been growing significantly and providing liquidity to the asset class. Industry “U.S. seniors 65+ are expected to control $800 billion of life insurance by 2030, with $161 billion believed to be eligible for life settlements “ -Bernstein Research
  8. 8. Private & Confidential 8 Luxembourg Life Fund Long Term Growth Fund Overview Low Correlation Asset Class: While most asset classes are typically affected by interest rate fluctuations, earning projections or credit rating shifts, life settlements are less sensitive to general drivers of global market turmoil and maintain an uncorrelated nature. Limited Credit Risk: No US Life Insurance Company has ever neglected to pay a legitimate insurance claim. Insurance carriers are heavily regulated and are required to maintain extensive reserves and solvency requirements in each state. Positive Market Growth: The U.S. life settlement industry continues to experience significant growth, with an estimated $12 billion plus annually in transaction volume, and is expected to reach $100 billion in the next decade. Asset Advantages
  9. 9. Private & Confidential 9 Luxembourg Life Fund Long Term Growth Fund Overview Asset Advantages Historical Attractive Returns: When compared with other asset classes, life settlements have consistently generated attractive long-term results. 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% Life Settlements Equities Corp Bonds Gov Bonds Inflation CD's T-Bills •Intermediate Government Bonds are represented by data from the Wall Street Journal from c. 1977 to present •Inflation is calculated using the Consumer Price Index, which is published by the U.S. Bureau of Labor Statistics •Corporate Bonds are represented by the Long- Term High-Grade Corporate Bond Index for the period 1969 to present •Large-Company Stocks are represented by the median of S&P 500 1988-2011 •T-Bills data from NYU Stern based on raw data from the Federal Reserve database St. Louis (FRED) •CD’s data from Certificates of Deposit Index (CODI) 2011 year end •Life settlements data from Carlisle Investment Group
  10. 10. Private & Confidential 10 Luxembourg Life Fund Long Term Growth Fund Overview Evolution of the Life Settlements Market Trend has been positive with slight drop after the beginning of the recession. Post 2008 a tertiary market for life settlements developed. Current size of the tertiary market has reached the secondary market Growth of US Life Settlements Market – ($ Billions) Future Outlook 0 2 4 6 8 10 12 14 16 18 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Tertiary Secondary
  11. 11. Private & Confidential 11 Luxembourg Life Fund Long Term Growth Fund Overview Future Outlook Expected Rates of Return Market Rates have been in a decreasing trend during the last 24 months. Market is still far from historical low rates. This represents an opportunity of life settlement investors. Life Settlement’s Market Rates – (IRR) 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Low High
  12. 12. Private & Confidential 12 Luxembourg Life Fund Long Term Growth Fund Overview Future Outlook for the Market After 2008 market rates increase to near historical highs, since they are decreasing The tertiary market has been increasing and becoming stable, providing liquidity Continued entry by investors will drive market rates to historical lows. More interest in alternative investments. Worldwide Investment Volume Future Outlook 0 10 20 30 40 50 60 Europe Americas Rest of World $BillionsofFaceValue
  13. 13. Private & Confidential 13 Luxembourg Life Fund Long Term Growth Fund Overview Long Term Growth Fund Strategy The Long Term Growth Fund’s investment strategy is to purchase carefully selected life insurance policies that are beyond the contestability period. The Fund seeks to build a large diversified portfolio across numerous sectors, including but not limited to carrier concentration, expected maturities, gender, age, impairment, geography and face value. In order to properly implement a buy and hold strategy, the fund seeks to isolate mortality risk and build a large sample size. The fund employs a mark to market valuation methodology to facilitate tertiary transactions. The Fund employs detailed actuarial and financial analysis to ensure that policies purchased are accounted for longevity risk as well as other variables of the actuarial profile. Strategy Uncorrelated Returns, Mortality Driven Low Downside Risk Low Volatility & Capital Preservation Few assets truly have low correlation in adverse conditions. The primary risk is experienced mortality which is unaffected by changes in the economy. Extreme scenarios, or ‘tail risk’ in life settlements has minimal downside impact compared to other asset classes. A diversified portfolio with a large number of insured lives will experience limited volatility.
  14. 14. Private & Confidential 14 Luxembourg Life Fund Long Term Growth Fund Overview Asset Acquisition Process The life settlement process can be divided into four stages: A. Sourcing: Acquiring the actual life settlement assets. B. Underwriting: A process to determine the mortality and other essential qualification procedures. C. Pricing: Using quantitative tools to determine value of a Particular life settlement asset. D. Closing: The process to acquire and maintain a life settlement asset. A. B. C. D. Transaction LISA Association graphic.
  15. 15. Private & Confidential 15 Luxembourg Life Fund Long Term Growth Fund Overview Return Profile The chart represents the IRR of an investment with the variable being the time taken to collect the death benefit. An attractive characteristic of life settlements is the ‘extreme’ events or ‘tail risk’ result in minimal downside compared to other asset classes. The Y-Axis also represents the probability of survival for an individual with a median life expectancy of 75 Months. Return Profile 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 25 35 45 55 65 75 85 95 105 115 125 135 145 155 165 175 Month From Valuation Date IRR Inforce Lives Median Life Expectancy of 75 Months & Projected IRR of 15% Analysis based on one individual policy..
  16. 16. Private & Confidential 16 Luxembourg Life Fund Long Term Growth Fund Overview Valuation Mark to Market Valuation
  17. 17. Private & Confidential 17 Luxembourg Life Fund Long Term Growth Fund Overview Investment Risk Overview Change in Market Rates Concentration Mortality Liquidity and Reinvestment Insurance Carrier Strategy Benefits & Risk
  18. 18. Private & Confidential 18 Luxembourg Life Fund Long Term Growth Fund Overview Change in Market Rates Benefits & Risk Expected long term performance is based on market rates and it is important capital is redeployed at the best possible yields. The interim performance of the fund will change with current market rates. All policies are unique and certain risk characteristics may or may not be compensated for in price by all buyers. This leaves a window of opportunity in the market to generate profits. Concentration Risk Geography, Age, Gender, Impairments, insurers, can all be diversified. A diversified portfolio will experience limited volatility and high cash flow predictability.
  19. 19. Private & Confidential 19 Luxembourg Life Fund Long Term Growth Fund Overview -100% -80% -60% -40% -20% 0% 20% 0 50 100 150 200 Changeinvaluediscountedat12% Life Expectancy Loss at 130% LE Life expectancy providers assess mortality relative to a standard life. For example a standard life has a mortality factor of 100%. If the life is impaired they may add an additional 50% mortality factor and decrease the median life expectancy. The higher the sensitivity to a change in expectation or experience, the greater the volatility, and therefore a higher required yield. The above chart is the results of a stress analysis on a portfolio. The Y-axis represents the change in value for a 30% extension in median mortality assumption. It is very apparent that there are vast differences in risk profiles. We believe this is a risk that is often mispriced by the market and allows us to add value to our investors by taking advantage of inefficiencies. Longevity Risk Quantified Stress Testing Mortality Assumptions 0% 5% 10% 15% 20% 25% 60% 80% 100% 120% 140% 160% Priceasa%ofFaceValue Mortality Factor Value relative to Mortality Factor Benefits & RiskMortality Risk
  20. 20. Private & Confidential 20 Luxembourg Life Fund Long Term Growth Fund Overview Benefits & Risk Mortality Risk contd. Actual mortality against expected mortality, which can be reduced through building a portfolio with a large amount of lives. Medical underwriters may systematically be too aggressive on assumptions, which can be reduced by using more than one provider and limiting the variation in expectations. Mortality risk is uncorrelated to business cycles. Extreme scenarios for longevity result in limited downside Liquidity Risk. Liquidity risk is the risk that the Fund may not be able to settle or meet its obligations on time. The Fund is exposed to monthly and annual cash redemptions of units at specified amounts. The Fund utilizes mark-to-market valuation systems that allows it to resell policies in the tertiary market to increase its liquidity profile. Our collective experience in both buying and selling policies allows us to meet drastic liquidity needs in an orderly fashion if necessary.
  21. 21. Private & Confidential 21 Luxembourg Life Fund Long Term Growth Fund Overview Insurance Carrier Risk Insurance carrier risk is rather limited, even in the current environment. Up to $500k guaranteed by state funds. Books of policies are generally sold in the event of an insurance company liquidating. Life policies have seniority against any other creditors Diminished Capital Base Bankruptcy/ Receivership Raising Capital Government Lending Restructuring / Asset Sale / Liability Reduction Rival Firms take over existing blocks of policies Seniority/ Insolvency Insurance contract has seniority over all forms on a bankruptcy after bankruptcy related fees and expenses Guarantee Up to 500k guarantee depending by state Investment Manger Due Diligence and Ongoing Monitoring Weed out high risk carriers through credit risk underwriting Diversity among carriers Minimum ‘A’ Rating by S&P Case Studies: Executive Life Insurance Mutual Benefit Life Insurance New England Mutual Life Insurance Kentucky Central Life Insurance Risk Risk Mitigation or potential outcome 1 2 3 4 HighLow Benefits & Risk
  22. 22. Private & Confidential 22 Luxembourg Life Fund Long Term Growth Fund Overview The primary risk in the fund is mortality. This is followed by the ability to quickly redeploy cash inflows at attractive rates, or market rate movements. The fund must maintain an adequate cash reserve for premium payments, which creates minimal interest on investment for the fund. An optimal reserve amount is determined by stressing mortality assumptions as cash inflows relative to premiums that will be paid. Mark to Market Valuation methodology allows the fund to resell policies if necedssary. Diversification and the law of large numbers will reduce the volatility of the returns of the fund. Policies are purchased Portfolio Performance Drivers Risks Risk Mitigation Access to product Policy selection and underwriting Market yields Mortality experienced Cash return Diversity Reinvestment rates Portfolio Count Capacity and execution Mortality experienced compared to expected Significant advances in medical fields Liquidity Changes in legal environment Access to providers Access to sellers of portfolios Strict underwriting Diversification Efficient management of portfolio and cash Robust analysis of carriers Credit monitoring of insurance carriers Strategy Strategy Specific Risks Benefits & Risk
  23. 23. Private & Confidential 23 Luxembourg Life Fund Long Term Growth Fund Overview Product Category Open-Ended Fund ISIN LU0412489550 Currency Base USD Management Style Active Invest Period Open Ended Manager Fee 2.00% Incentive Fee 20% with 8% hurdle Lock-up period N/A Liquidity Quarterly with 90 day notice NAV Monthly Minimum Investment USD $250,000 Fund Facts Long Term Growth Fund
  24. 24. Private & Confidential 24 Luxembourg Life Fund Long Term Growth Fund Overview Service Providers Fund Structure Luxembourg Life Fund 9, Rue Sainte Zithe, 4th Floor L-2763 Luxembourg Custodian Bank Caceis Bank Luxembourg 5, Allée Scheffer L-2520 Luxembourg Central Administration Caceis Investor Services 5, Allée Scheffer L-2520 Luxembourg Valuation Agent Lewis & Ellis P.O. Box 851857 Richardson, TX 75085-1857 Investment Manager Carlisle Management Company SCA 9 rue Sainte Zithe, 4th Floor L-2763 Luxembourg Legal Advisor Rutsaert Legal 14, rue de Strassen L-2555 Luxembourg Auditor KPMG Luxembourg 9 Allée Scheffer L-2520 Luxembourg Tax Advisor Baker & McKenzie 10 - 12 Boulevard Roosevelt L-2450 Luxembourg
  25. 25. Private & Confidential 25 Luxembourg Life Fund Long Term Growth Fund Overview Jose Garcia is CEO of Carlisle Management Company SCA a Luxembourg based fund management firm focused on the United States secondary life insurance market known as life settlements. As its Chief Executive, Mr. Garcia is responsible for the companies overall business and investment strategy. Carlisle specializes in alternative asset strategy consulting and life settlement fund development. Mr. Garcia has a ten year track record of success across several sectors of the Life Settlement industry, extending to industry brokers, life settlement providers, to fund management, fund structuring, and investment marketing. During his tenure at a leading life settlement fund, Jose Garcia has led and overseen the purchase of more than $3 billion in life settlements while raising more than $1 Billion in capital. Mr. Garcia graduated with honors from Old Dominion University with degrees in Finance and Economics. He holds a Masters of Business Administration from George Mason University. Our Team Jose Garcia – Chief Executive Officer
  26. 26. Private & Confidential 26 Luxembourg Life Fund Long Term Growth Fund Overview As Chief Operating Officer of Carlisle Management Company SCA, Mr. Mol is responsible for overseeing all structuring, legal and regulatory operating activities. Before joining the Carlisle Group, Mr. Mol was employed by the Equity Trust Group for thirteen years and spent the first two years working in the Netherlands and the last eleven years in Curacao where he was the Director of Operations. As the Director of Operations he was responsible for the day-to-day management of the Curacao office and leading a team of 40 trust professionals. Furthermore he was involved with the management of several regulated mutual funds with assets totaling more than $ 1.5 billion. Mr. Mol has extensive experience in the fiduciary services industry advising both corporate and private clients, and handling complex accounting issues. Mr. Mol has knowledge of life settlement investment vehicles as well as the institutional investment environment. Mr. Mol has a Bachelors in Accounting and has a Masters in Business Administration from Henley Business School/University of Reading, United Kingdom. Our Team Tim Mol – Chief Operating Officer
  27. 27. Private & Confidential 27 Luxembourg Life Fund Long Term Growth Fund Overview As Chief Financial Officer for the Carlisle Management Company SCA, Victor Heggelman oversees all internal and external financial operations and investment reporting. Prior to joining the Carlisle, Mr. Heggelman was senior controller for Morgan Stanley where he oversaw financial and tax matters as well as corporate compliance for a portfolio of companies within Morgan Stanley’s real estate funds. Previously, as Audit Manager for KPMG, he audited and advised numerous life settlement investment vehicles on accounting policies and valuation. Mr. Heggelman also worked closely with funds and fund managers in Geneva, London and New York on financial audits and valuation issue. He also assisted various life settlement funds with valuation methodology of their life settlement investments. Mr. Heggelman graduated from Jacksonville University with degrees in Accounting and Finance and is an active member of the Florida Institute of Certified Public Accountants since 2001. Our Team Victor Heggelman – Chief Financial Officer
  28. 28. Private & Confidential 28 Luxembourg Life Fund Long Term Growth Fund Overview Mr. Xavier Deu serves as Carlisle’s Chief Marketing Officer and is responsible for overseeing all business development projects. Prior to joining Carlisle, Mr. Deu created Grupo Misame, a Spanish firm that developed a new approach to allow the dual ownership of residential real state by families and investors, and allow for securitization of such mortgage related product. Under Grupo Misame, developed several consulting projects among them for the Government of Andorra and the Government of Catalonia in Spain. Prior to Grupo Misame developed several consulting tasks, among them as Consultant for the Homebuilders Association of Andorra, the Ministry of Economics in Andorra, in de development and implementation of future economic laws. In the US, worked at The Riskmetrics Group, spin-off of J.P. Morgan, in the sales & Marketing department. Before joining Riskmetrics worked as a trader for several years and before developed several tasks on distribution for financial products for several firms in the US. He holds a degree in Economics from the University Autonomous of Barcelona and a Masters in International Finance and Economics from Brandeis University. Our Team Xavier Deu – Chief Marketing Officer
  29. 29. Private & Confidential 29 Luxembourg Life Fund Long Term Growth Fund Overview Carlisle Management Company, SCA 9, Rue Sainte Zithe 4th Floor L-2763 Luxembourg This presentation is intended to be for information purposes only and it is not intended as promotional material in any respect. Reliance should not be placed on the views and information in these presentations when making individual investment and/or strategic decisions. A fund’s investment objectives, risks, charges and expenses should be considered carefully before investing. This document contains information in summary form only and its accuracy or completeness cannot be guaranteed. No liability is accepted for any loss of whatsoever nature arising from the use of this information. Application for units in this fund may only be made on the basis of a prospectus relating to the fund and this document may only be distributed to those eligible to receive that prospectus. The distribution of this document may be restricted in certain jurisdictions and it is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdictions. The prospectus contains this and other important information about the Funds. To obtain a prospectus free of charge, call Carlisle Management Company’s registered office in Luxembourg, or contact us by sending an email to info@cmclux.com or by visiting our Web site at www.cmclux.com . Please read the prospectus carefully before investing or sending money. Source: Carlisle Management Company (SCA). Long Term Growth Fund Bloomberg Ticker PENLIFA LX ISIN Code LU0412489550

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