Pension funds and wealth managers predict inflation to return to ‘normal’ by Q3 2023

by | May 17, 2023

Investors don’t expect US inflation to fall back to pre-Ukraine war levels until Q4 2023 with UK and Swiss inflation following in Q1 202

New research (1) from Managing Partners Group (MPG), the international asset management group, predicts inflation in Europe is tipped to be the first to return to fall back to rates before the Russian invasion of Ukraine – in Q3 2023, ahead of inflation rates in the US, UK and Switzerland.   

The study for MPG, carried out among 100 professional investors across Switzerland, Germany, Italy, the UK and the US found 33% expect Eurozone inflation to fall back to its rates before the Russian invasion of Ukraine in Q3 2023 while 17% expect it to take slightly longer, and not normalise until Q4 2023. 

That contrasts with views on US inflation, in the survey of wealth managers and institutional investors collectively responsible for £258 billion assets under management. 

Around 30% of the professional investors surveyed don’t expect US inflation to fall back to its rates before the Russian invasion of Ukraine until Q4 2023 while 22% think this won’t happen until Q1 2024.  

The research for MPG, which runs the High Protection Fund investing in Life Settlements, found that UK and Swiss inflation is expected to take the longest to return to ‘normal’ rates. Nearly a third (32%) of professional investors expect it to be Q1 2024 until UK inflation returns to its rates before the Russian invasion of Ukraine, and a further 32% think it will also be Q1 2024 until Swiss inflation rates return to ‘normal’.  

The table below shows when professional investors expect inflation to fall back to its rates before the Russian invasion of Ukraine 

Country/ 

region 

Q2 2023  Q3 2023  Q4 2023  Q1 2024  Q2 2024  Q3 2024  Q4 2024  H1 2025  H2 2025 
UK inflation  14%  7%  27%  32%  9%  4%  4%  3%  0% 
Eurozone inflation  9%  33%  17%  8%  17%  11%  1%  0%  4% 
US inflation  5%  14%  30%  22%  12%  8%  4%  1%  4% 
Swiss inflation  10%  10%  23%  32%  14%  3%  3%  5%  0% 

 MPG’s High Protection Fund is seeing strong demand for Life Settlements as a growing part of the alternative assets sector. It delivered net annualised returns of 9.28% in 2022 and attracted net inflows of $20 million.  

Life settlements are US-issued life insurance policies that have been sold by the original owner at a discount to their future maturity value. They have little or no correlation to equites and bonds.  

The High Protection Fund has returned 2096.91% since it was launched in July 2009. It aims to achieve smooth predictable investment returns of between 8% and 9% per annum, net of fees. 

Jeremy Leach, Chief Executive Officer of Managing Partners Group commented: “Inflation remains a major issue for professional investors and is driving investment choices and asset allocation with investors looking for assets which provide some degree of protection. They believe Europe will be the first to return to the rates experienced before Russia invaded Ukraine, with the US, UK and Swiss lagging behind. However, this still isn’t expected until Q3 at the earliest and some predict this won’t happen until a year later, meaning the need to invest in assets which continue to perform well through periods of high inflation remains strong.” 

MPG is a multi-disciplined investment house that specialises in the creation, management and administration of regulated mutual funds and issuers of asset-backed securities for SMEs, financial institutions, and sophisticated investors. It currently manages two funds with a combined gross value of $500m. 

High Protection Fund 

High Protection Fund (the “Fund”) was launched in 2009 and is an absolute return fund that aims to achieve smooth predictable investment returns of between 8% and 9% per annum, net of fees. 

The fund offers share classes in a number of different currencies and aims to deliver returns by investing inLife Settlements or Traded Life Policies (TLP’s) or companies that invest in Life Settlements. 

Life settlements are US-issued life insurance policies that have been sold by the original owner at a discount to their future maturity value and are institutionally traded through a highly regulated secondary market. The market increasingly includes high profile institutional investors and service providers, including Apollo Global Management, GWG Life, Vida Capital, Broad River Asset Management, Red Bird Capital Partners, Partner Re, SCOR, Berkshire Hathaway, Coventry First, Wells Fargo, Bank of Utah, Wilmington Trust, and Credit Suisse Life Settlements LLC. 

The standard deviation in its performance has been 0.13% since launch and its Sharpe Ratio of 4.4323 reflects its excellent consistency in outperforming the risk-free rate. The fund has no initial or performance fees which has given it a performance edge on competing funds within the Life Settlement sector. 

Vita Nova Hedge Fund 

Vita Nova Hedge Fund is a mutual fund that aims to achieve long term capital growth by identifying short to medium term investment opportunities with inherent pricing weaknesses and the potential to improve over time. The fund’s investment management team may rely on economic forecasts and analysis in respect of interest rate trends, macroeconomic developments, global imbalances, business cycles and other broad systemic factors to identify pricing weaknesses with the potential to strengthen over time. 

Where the Manager identifies value opportunities it has the ability to use gearing to over invest wherever possible whilst preserving liquidity to afford relatively quick changes to the portfolio weighting and to take advantage of short-term arbitrage and alpha opportunities. 

Vita Nova Hedge Fund may hold other investments including cash or near-cash assets, units or shares in other collective investments schemes, listed securities and registered companies. 

Vita Nova’s annualised rate of return since its launch in August 2014 is 22.05% with a standard deviation of 1.81% and a Sharpe Ratio of 0.5378. 

For more information on Managing Partners Group see: www.managingpartnersgroup.com 

 

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