Study reveals illiquid assets move up the investment agenda for institutional investors and wealth managers

by | Mar 27, 2024

  • Research from MPG finds more than three-quarters of professional investors will increase allocations to illiquid assets in the next five years
  • But more than half seek an additional illiquidity premium of at least 2%

More than three-quarters (78%) of institutional investors and wealth managers will increase allocations to illiquid assets over the next five years with 10% making dramatic increases, new research from international asset management company Managing Partners Group (MPG) reveals.

Its survey of global institutional investors and wealth managers holding assets of €107 billion under management, finds that 10% of respondents will cut allocations to illiquid assets in the next five years. Just over one in ten (11%) of those surveyed will keep allocations the same.

Current allocations to illiquid assets for those investors surveyed were typically between 11% and 25%, with 60% of respondents falling into this range. Around one in six (16%) say they invest between 25% and 50% of their portfolios in illiquid assets while just under a quarter (24%) of investors have up to 10% dedicated to illiquids.

When asked what level of additional premium is required to invest in illiquid assets, the majority (51%) of investors say they need 1.5% to 2% per annum. Just under a fifth (18%) say between 2% and 2.5% a year and the same number require 1% to 1.5%. Around one in seven (13%) say the illiquidity premium required is 0.5% to 1% per annum. 

The portfolio of Life Settlements in MPG’s High Protection Fund have an average Risk Rating of A+ from AM Best. High Protection Fund delivers long-term capital growth by investing in a portfolio of Life Settlements. It delivered net annualised returns of 9.31% in 2023 and 219.72% since launch in 2009. It attracted net inflows of $20 million last year and aims to achieve smooth predictable investment returns of between 8% and 9% per annum, net of fees. This consistent performance is achievable because market pricing on Life Settlements currently generates a yield of 12% pa on a discount driven basis.

Jeremy Leach, Chief Executive Officer of Managing Partners Group, commented: “Investors increasingly appreciate the long-term return potential from holding illiquid assets in their portfolio. Investing in Life Settlement funds, for example, which are life insurance policies that have been sold by the original owners at a discount to their fixed maturity value and are institutionally traded through a highly regulated secondary market, offer the opportunity for consistent outperformance as well as helping to diversify portfolios.”

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.

For more information on High Protection Fund see: www.highprotectionfund.com

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

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