The simple answer is NO.. but that does not mean that you have to assume large amounts of risk to get good returns.  What is important is that you identify what the risks are and have specific strategies to mitigate them or otherwise protect your investment capital.

If you are satisfied with low single digit returns then muni’s are probably right for you and I would not waste much time reading further. We are alternative asset specialists and provide strategies that have the potential for double digit returns and we spend a lot of time managing risks.

The fact is that the best returns can be found where they always have been i.e investing in corporations or projects that are creating new value. Whether that be a small company bringing a new product to market, a new clean energy project, or any of the literally millions of value creating opportunities around the globe. If you want returns you need to invest in strong new projects or companies.  Clearly, anything new has risk of failure for any of a million reasons. But do you just have to accept the risk of loss to get these returns?

Absolutely not! Sophisticated investors are adding layers of protection to the deals they do. This is done by “wrapping” the deal with a non-correlated, secure type asset that can repay the principal invested even if the project fails.

Leading investors and banks in Europe are looking to life settlements to fill this roll. Life settlements are one of the most highly uncorrelated assets available, returns are simply not impacted by interest rates, market or political trends. And given the right structure they provide a predictable cash flow. They are not very liquid and have a long term horizon but they are an ideal asset class to protect principal invested in similarly long term projects like real estate, energy, etc.

I would encourage any investor who would like to invest in private equity or project finance to spend time understanding the value that life settlements can play in reducing the risk while maintaining the ability to get yield. Unfortunately many investors seem to prefer to keep their head down and not take the time to understand the opportunity they offer.

We helped this client reduce annual life insurance expenses by over 60%, keep their coverage…all at no cost to them.

We have a long term client who purchased a $1M survivorship life insurance policy in 2000 from a highly rated carrier. Several years later they took out a loan for $75,000 to help with college tuition for their 3 children.

The annual premiums are currently $6,088 and loan interest payments are $5,900 totaling an annual payment of $11,988. The loan has grown to $80,000 reducing the death benefit to $920,000. This policy had become overly expensive and a life settlement was an idea but we had a much better solution for them.

Both insured have maintained their preferred health status so we proposed a replacement not a life settlement via a 1035-tax free exchange to an alternate highly rated carrier with these results. This would not only allow them to keep life insurance protection but eliminate the $80,000 loan.

We rolled the cash surrender values net of the loan balance to a new $1M Survivorship policy with annual premiums of $3,912. The family is out from under the growing loan, restored their full $1M benefit and reduced the annual outlay from $11,988 to $3,912 for a policy that will carry to well beyond the youngest insured’s age 100.

The surrendering carrier will send a 1099-R to the insured’s for the value released above the cost basis which in this case is approximately $10,000 of ordinary income. But considering all, the client is very happy and will still save a ton of money beginning in year 1.
The moral of this story is regularly review your life insurance situation a far better deal may well be out there.