Investment
Strategy
Since the inception of our firm, Preston has focused exclusively on generating attractive, risk adjusted return outcomes for our investors by sourcing and managing diversified pools of life settlements.
We believe that investing in and managing pools of life settlements offers a discernible set of risks that can be analyzed, evaluated, and mitigated using sophisticated data sets and analytics.
Given that life settlements derive their returns from longevity and not global macroeconomic factors (e.g., interest rates, geopolitical risks, GDP trends), return outcomes in the asset class are generally uncorrelated to the risks and returns of both traditional and alternative assets. This lack of correlation may provide additional diversification benefits to investors’ portfolios as they seek to improve their tangency portfolio in the ever-changing world of investing.
Material risks associated with life settlement investing:
Life settlements are life contingent investments with significant exposure to longevity risk. Not only are there challenges in sourcing policies and assessing the legal, financial and longevity risks attendant to acquiring policies, but there also are significant challenges in managing life settlement investments, tracking insureds, and collecting death benefits. A prospective investor should review the applicable legal offering documents prior to investing in any fund or investment strategy managed by Preston Capital.
As discussed in detail herein, life settlements are long-dated investments and are not readily marketable. Moreover, not only is there a significant cash outlay to acquire policies, but premiums must be paid to keep the policies in force through maturity, and these additional premium payments are material. Portfolios investing in life settlements must manage cash flows in order to maintain sufficient cash on hand to keep policies in force. If the portfolio does not accurately determine future premium requirements, if insureds live longer than expected, if life insurance companies increase cost of insurance rates, or if such portfolios are not able to collect death benefits on matured policies, such portfolios may not have sufficient resources to maintain their policies in force. The life settlements market is highly uncertain and subject to a variety of forces both intrinsic to the life settlements market and general economic forces.
Demand for and pricing of the policies depends significantly on the health, medical condition and life expectancy of the insured; life expectancy tables then in use by the life settlement industry; and changes in general economic conditions, including interest rates, inflation rates, government regulations, overall industry conditions (with significant capital being deployed in this space over the past few years), political conditions, volatility in the financial markets, and the legislative and regulatory environment. Accordingly, such portfolios may not be successful in attempting to identify and acquire suitable policies. In the event a portfolio succeeds in acquiring such policies, these same factors affecting demand for and pricing of the policies may make it difficult for such a portfolio to dispose of such policies. The market for policies is not liquid and is uncertain. These uncertainties could cause a portfolio to pay too much for policies or to sell policies at too low a price. Furthermore, should such a portfolio need to sell policies for liquidity reasons, it may not be able to do so at profitable prices, or at all.
Prior to making an investment with Preston Capital, prospective investors should review the risks discussed in greater detail in the applicable legal offering documents, which will be made available to you such prospective investors prior to making an investment.
ATTRACTIVE RISK-ADJUSTED Returns
Generating equity-like returns with fixed income like risk
UNCORRELATED OUTCOMES
Largely uncorrelated to the broader market providing potential portfolio diversification benefits
MITIGATE DOWNSIDE RISK
Properly diversified portfolios of life settlement assets may mitigate the risk of principal loss
SELF-LIQUIDATING, LOW CREDIT RISK ASSETS
Senior obligation of highly rated U.S. insurance companies
DATA-DRIVEN RESULTS
Sophisticated analytics and proprietary data sets
Our Approach
Leveraging our established sourcing acumen, coupled with our time-tested underwriting capabilities, we look to create pools of life settlement assets that, when properly diversified and managed, may generate attractive and uncorrelated risk-adjusted returns for investors.