THE INVESTMENT ENVIRONMENT - Volatility, Uncertainty, and War

The S&P 500 dropped 2.6% in February and by mid-March was down 13% on the year. Other markets did even worse: Euro Stoxx ( -16.9%), Nasdaq 100 (-21.3%), and China CSI 300 (-31.4%). All markets were volatile, but the commodity markets were the worst with the LME suspending Nickel trading due to a 250% rise in two days. China based Tsingshan Holding Group Co is rumored to have a huge short position backed by JP Morgan and other banks and could not meet margin calls. Oil traded as high as $130 a barrel. European fertilizer makers have had to cut production due to the high price of natural gas and European steel manufacturers are cutting operations due to record prices for power.

The war in Ukraine intensified with millions of refugees, hospitals and schools bombed, and over a thousand casualties so far. Investors' thoughts will clearly be with the Ukrainian population as they resist, but any analysis of the range of potential economic and political outcomes can only be speculative. The future is more uncertain than ever with even more pressures on inflation, supply chains, commodity prices, and food production - projected slower economic growth and higher inflation.

Investors were already struggling to analyse the potential effects of the unwinding of 13 years of unprecedented QE and ZIRP policies and now the uncertainty has been compounded. Markets are likely to remain volatile and future investment value harder to gauge than ever. 2022 may be a good year to be invested in Life Settlements.

THE LIFE SETTLEMENT MARKETS - LS Markets Stable; News from a European Investor Conference

The Life Settlement markets remained stable albeit with lower volume and a gradual shift in favour of the buyers, contrary to the past two years which favoured the sellers.

The Fund Managers attended an Investor Conference in Amsterdam in early March and it was an interesting study in contrast compared to similar conferences in the USA. There was a strong focus on ESG related issues including the need to be ESG accredited and have ESG Directors in house to ensure ESG rules were being followed in all investment decisions. The majority of the attendees and panelists had jobs that were ESG related.

No one actually defined ESG precisely - it seems to be similar to a successful political slogan and can mean different things to different people. The emphasis on ESG and its impact was astonishing given how little attention was paid to the recent invasion of Ukraine, the scale of the conflict, and its potential consequences on investments in all asset classes.

One of the more interesting non-ESG investment topics was the ability of different strategies to perform in the current investment climate with the unwinding of ZIRP, the war in Ukraine, and the forecasted lower growth and higher inflation scenario. Here there was a strong case for the Laureola Life Settlement strategy, which (for the record) has been given the ESG accreditation by the UN PRI on account of its contribution to solving social issues.

Written By Tony Bremness