Traded Endowment Policies (TEPs)

Traded Endowment Policies originate from UK With Profits life insurance policies traded onto the secondary market. They are bought at a discount circa five years prior to maturity.  Because the sum assured, plus accrued bonuses are guaranteed, investors’ capital in turn is also guaranteed between 80% and 120%. If this part is similar to a zero coupon the terminal bonuses of the policies act like an “equity bullet” as all life offices pay those depending on the investment performance of their underlying multi-asset portfolios.

Institutional clients looking to lower their risk as well as their capital market correlation should consider TEPs. Equally hedge and absolute return funds might be interested in this strategy.

The TEP proposition can be accessed via a managed account or the Protected Asset TEP Fund plc (PATF) - an open-ended investment company, domiciled in the Isle of Man in to which Qualifying Investors can buy shares.

The PDL International TEP mandate is a portfolio consisting of a minimum of 50 traded endowment policies from a variety of UK Life Offices. The investor will directly own each of the policies which are administered by PDL’s sister company TMS. All cash is hold in escrow accounts. On an aggregated level the portfolio offers capital guarantees of between 80% and 92% with terms of 3, 5 and 10 years. Due to policies maturing throughout the term there is irregular liquidity, typically starting after 1 to 2 years. At current bonus rates the annualised returns are between 4% and 8%.

The Protected Asset TEP Fund is a qualifying investor scheme with monthly liquidity and a 10 year plus track record. Since launch it has outperformed the FTSE 100 by 36% at significantly lower volatility. It is available in Sterling, Euro and Dollar share classes (hedged).

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© 2011 PDL International is a trading name of Absolute Assigned Policies Limited. Absolute Assigned Policies Limited is a company registered in England and Wales (company registration number 939239) and is authorised and regulated by the Financial Conduct Authority. Absolute Assigned Policies Limited's registered office is at Stanmore Business and Innovation Centre, Stanmore Place, Honeypot Lane, Stanmore, London, HA7 1BT, United Kingdom. Absolute Assigned Policies Limited's VAT number is 805732537.