THE INVESTMENT ENVIRONMENT - Markets Volatile; Ukraine Invaded

The S&P 500 declined 5.3% in January. Gold and oil were up; crypto and bond prices down. The Russians invaded the Ukraine on 24th of February but markets already had a full slate of concerns prior to the invasion.

Inflation refuses to go away: consumer prices were up 7.5% and housing prices up 18.8% in the USA with even smaller markets showing this level of increase. The Bloomberg Commodity Index is up over 12% ytd, led by crude and gasoline. Fertilizer is double the price from a year ago and the world's largest supplier of weedkiller - an important input in food production - declared a force majeure due to shortages of the key ingredient glyphosate.

Many key commodities futures have slipped into backwardation indicating low stockpiles of the world's most important commodities (food, energy, metals) without the usual supply response. The Goldman Commodity analyst described the situation as "unprecedented".

Our hearts go out to the brave Ukrainians in their struggle and of course their problems dwarf any investment issues. But the Russian invasion makes the global investment landscape even more uncertain: Russia is the 5th biggest trading partner with the EU, the #1 supplier of energy to the EU, and, with the Ukraine, an important exporter of corn and wheat.

Uncertainties have increased; the value of a non-correlated investment strategy like Life Settlements is greater than ever.

THE LIFE SETTLEMENT MARKETS - Markets Stable; Tertiary Markets Active

LS Markets were stable with average gross, projected IRR's in the 12% to 14% range on completed transactions. There were interesting developments in the tertiary market where several larger portfolios were offered including one with over 100 policies. There was some indication that the sellers were motivated and that at least some of the portfolios were of good quality, which is a marked difference from most of the past two years where tertiary trades were mostly the undesired policies to be avoided at all costs.

The Life Settlement news magazine "The Deal" reported encouraging developments in the fight to prevent insurance companies from competing with Life Settlements by offering special "enhanced cash surrender offers" which may violate insurance laws in at least some States, in part because the offers may favour some policy holders over others.

The issue was raised and discussed at a recent meeting of the National Association of Insurance Commissioners with several States having already fined some carriers for such offers and other States starting to review their own legal and regulatory framework and how it applies to this relatively recent development.

It appears to be another example of insurance companies trying to make life difficult for the Life Settlement industry with limited success, probably due to quality legal representation and lobbying of the LS industry and the fact that each policy holder has a vote.

Written By Tony Bremness