Michael Abraham

New research⁽¹⁾ from investment management company Managing Partners Limited (MPL) has revealed a sharp rise in the level of discontent among with profits policyholders over the last year.

The research shows that 28% of the generation with the highest proportion of policyholders – the 45-54 age group – say they intend to stop investing in their policies, representing a substantial increase on the 19% who said this in similar research⁽²⁾ last year. More than one in three (35%) in this age group hold with profits policies.

Jeremy Leach, Managing Director of MPL, commented: “Another year of poor financial markets and disappointing bonus announcements has pushed with profits policies another step closer to their inevitable demise. Those people in the older generation will have bought endowments to pay off their mortgages and will be bitterly disappointed by the shortfalls they have been left with. But the high degree of disillusion among the younger generations also demonstrates that the with profits concept has no future.”

The research also reveals a very low level of penetration of with-profits based products among those aged 35 and under. Its findings reveal that only 7% of people aged between 25 and 34, and 4% of those aged 18-24, have a with-profits policy. This compares to 23% of people aged 35 – 44 and 35% of those aged between 45 and 54. The research shows that ownership has declined on the year among those investors who were most disillusioned last year, the over-55s, of which only 25% now own a policy compared with 28% a year ago.

Investors looking for an alternative to with-profits investments that provide steady, predictable returns should consider investing in Traded Life Policies (TLPs). These are United States-issued life assurance policies sold before the maturity date to allow the original owner to enjoy some of the benefits during their lifetime. TLPs are purchased at a discount from their maturity value, which in the majority of cases is fixed at outset and means that they are guaranteed to rise in value. The TLP market has seen huge growth from $50m in 1990 to $20bn in 2006.

While TLPs carry the risk that it is unknown when the lives assured will die, the key attraction of a TLP fund is that with the right diversification and actuarial analysis, they can be used to deliver steady, predictable returns. Because of this high degree of certainty and their solid underlying value, it is possible for products that invest in them to secure a substantial degree of gearing to enhance returns and initial allocation rates. This is particularly attractive to UK investors in countering the surrender penalties imposed for pulling out of with profit funds.

A round table staged by MPL in April concluded that volatility in equity and property markets would not stop investors making positive returns from TLPs in 2008. Two IFAs who attended the debate, including Nigel Newlyn, Director of Argent Personal Finance Managers, and David Chinn, Partner in the Financial Services Division of Oury Clark, both said they were increasing their clients’ exposure to TLPs. Professor Merlin Stone, of the Bristol Business School, said that the predictability of TLP returns meant that they could act as a replacement for with profits and help address the increasingly important issue of longevity risk.

For retail investors, MPL offers a GBP Growth share class in its Traded Policies Fund. The fund is a fully-regulated Cayman Islands mutual fund that can be included in personal portfolio bonds, wraps and SIPPs. Its first year performance to 1 April 2008 was 9.62% on a bid-to-bid basis.

For further information, please visit the website: www.managing-partners.com

For further information on Managing Partners Limited range of funds, call 0207- 965- 4631 or visit (www.managing-partners.com).

⁽¹⁾ MPL commissioned the research company YouGov to interview 2,115 people between 21^st and 22^nd April 2008. The research was conducted online. The sample was based on a nationally representative sample of GB adults aged 18 and over. Results were weighted in order to be nationally representative.

⁽²⁾MPL commissioned the research company YouGov to interview 2,438 people between 26^th and 30^th April 2007. The research was conducted online. The sample was based on a nationally representative sample of GB adults aged 18 and over. Results were weighted in order to be nationally representative.

Managing Partners Limited (MPL) is a multi-disciplined investment company that specializes in managing alternative asset classes for institutions and sophisticated investors. It is a market leader in managing funds that invest in traded policies, an asset class that is renowned for its low-risk, inherent guarantees and balanced growth characteristics.

The board of MPL has more than 70 years’ collective experience in asset management.

MPL is recognized by the Cayman Islands Monetary Authority as an asset manager, where it manages a number of collective investment schemes and regulated mutual funds with total assets in excess of US$100 million.

For more information please contact:

Jeremy Leach

Managing Director, MPL

07770 456654

Phil Anderson/ Stephen Sheppard/ Marisa Elliott

Citigate Dewe Rogerson

020 7638 9571

Published on 09 Jul 2008 at 07:16 pm