Longevity investing is finally coming of age and Alpha Growth PLC (LON:ALGW) is leading the charge. The company which has offices on both sides of the Atlantic is making it a viable investment opportunity.

A thoughtful risk-taker, Gobind Sahney has been connecting the dots of opportunity by establishing Alpha Growth, as a specialist consultancy providing services for institutions, family offices, and high net worth investors looking for stable returns from the longevity assets market, specifically life settlements.

Alpha Growth has a team of alternative asset managers with the ability to spot undervalued life settlement assets with deep experience in large scale mandates.

In addition, the group’s BlackOak Alpha Growth Fund, provides non-correlated, strong returns in a tax-efficient manner. The fund invests in life settlements targeting annual returns in the 10% to 14% range.

“My start was in distressed debt over twenty years ago. I have always been interested in discounted assets – the difference between an assets market value and notional value. Life settlements are a form of discounted asset since you buy it for a discount to its terminal value,” Alpha Growth founder CEO Gobind Sahney told Proactive.

According to a study by investment firm Conning, $200 billion worth of life insurance will lapse or be surrendered each year through 2027 — all of which could qualify for a life settlement and be pocketed by the policy owner.

In a nutshell, life settlements effectively create a secondary market for life insurance policies. What’s more this secondary market has been years in the making and has now gathered investment scale. As a result, institutional investors have waded in by investing billions of dollars in the secondary market for longevity assets like life settlements.

Proactive talked with Sahney about how Alpha Growth helps qualified investors achieve stable returns and portfolio diversification by investing in the asset class.

Can you describe Alpha Growth’s business model and value proposition for institutional and qualified investors?

Alpha Growth’s business is to provide advice and consultancy services to existing and prospective holders of longevity assets, specifically life settlements. A life settlement refers to the sale of an existing US insurance policy to a third party for a one-time cash payment. Payment is more than the surrender value, but less than the actual death benefit. After the sale, the purchaser becomes the policy’s beneficiary and assumes payment of its premiums. By doing so, the buyer receives the death benefit when the insured dies.

We provide advice on sourcing, acquisition, and disposal strategies – execution, performance monitoring, and analytical services in relation to such assets. As well as asset management on a full-service basis. The revenue model is fairly straightforward through fees and performance-related bonuses earned in the above functions.

Longevity assets are relatively modest compared to other asset classes in the investment spectrum and don’t merit creating an internal team. Hence, outsourcing the asset investment and management to Alpha Growth makes a lot of sense.

Why do you consider longevity assets like Structured and Senior Life Settlements (SLS) an attractive alternative asset class?

How longevity assets are non-correlated to the real estate, equity capital, and commodity markets is a function of time. For life settlements, as the time that passes gets closer to the realisation of the face value of the policy, the value of the asset increases.

Hence, the steady increase in the net asset value of the investment over time. Furthermore, the monetary realization of life settlements is certain as payment is from an investment-grade rated insurance company. This makes it highly attractive to investors wishing to counteract volatility within an investment portfolio and achieve yield. Structured settlements are paid from the same investment grade insurance companies that provide a monthly cash flow based on a prescribed schedule.

How does Alpha Growth deliver portfolio diversification and returns to its clients?

Being a specialist in an asset class allows us to get really good at what we do. We deliver portfolio diversification by giving our clients access to deal flow and opportunistic situations; internal expertise to underwrite investment and execute; a professional and sober approach to the asset class; willingness to be transparent and accountable.

We deliver superior returns by our knowledge in structuring the investment holdings efficiently; realistic fee structures aligned with the investor’s objectives; and diligent oversight and management.

Please tell us about the BlackOak Alpha Growth fund and its target annual rate of return.

We started the BlackOak Alpha Growth Fund after receiving feedback from groups that shared their views on the existing choices of life settlement funds. The features we have are very intentional and we believe in aligning our interests with the investor.

Apart from a target return of 10% to 14% net of fees, we offer monthly NAV and contributions, quarterly redemptions, and performance fees calculated on realized gains. Furthermore, a fund started today utilizes current actuarial data versus our peers that are still holding policies using older data. All of our policies have been and continue to be valued with the most current actuarial data and tables.

Do you have a fee structure which makes you investor friendly?

Yes. We have a 1.5% management fee and a performance fee of 20% above a cumulative hurdle of 7% payable upon redemption or distribution. What that means is that the investor pays on realized gains when they get their cash back, versus unrealized gains at the end of the year.

Would you say it’s a good time to be invested in an exclusive uncorrelated asset class, with no link to the volatile stock markets?

Absolutely! Longevity assets are life contingent and do not rely on the movement of any other financial event to achieve a return.

What is the outlook for Alpha Growth as an investment proposition?

We are offering shareholders a way to participate in the growth of the longevity asset sector. The secret sauce is a dedicated highly qualified team.

What are the growth drivers for your advisory business?

The growth driver is building assets under management (AUM) by creating structures that investors utilize to invest in longevity assets, or by being engaged by clients to build/manage their investment in the asset class.

JV’s (joint ventures) can accelerate our objective of building AUM. M&A is only valuable if we can accrete AUM and bring on skillsets, or bolt-on another strategy to the company.

Does Alpha have other products it intends to offer its clients?

We are always thinking of how we can meet investor requirements through the use of longevity assets in an efficient manner. Also, we look at what we think we would like to see as investors in longevity assets. Two initiatives that you will hear more about moving forward is our Alpha Growth & Income fund, which combines structured settlements with life settlements. We are also developing an insurance product that will cover the longevity risk of an investment in life settlements.

Contact the author Uttara Choudhury at uttara@proactiveinvestors.com

Follow her on Twitter: @UttaraProactive