Alternative Asset Opps Pcc Share Discussion Threads

[papy02] 18/11/2014 11:21

So the NAV is down by .7p in Oct before currency effects, or 1.6%

I'm somewhat mystified by that, as unwinding of the 12%pa IRR should more than offset operating costs (incl premiums paid)?

0.7p is more than the 0.5p NAV reduction that resulted from changing the tail of small etc policies onto Valuation Basic Table LE estimates. I'd thought the bulk of LE revisions were now behind us, but maybe not?

Does anyone have an insight as to what drove the NAV reduction - in particular whether it's a 1-off or likely to be recurring?

[ironstorm] 18/11/2014 09:07

I have recently bought a small stake here - before the news on NAV.

Bit of an insurance policy really - will be looking to add more as and when.

hxxp://ironstorminvesting.blogspot.co.uk/

[gingerplant] 04/11/2014 20:38

Indeed - the fact that those 90 year-olds may soon start popping their clogs having (hopefully...) enjoyed a great retirement!

[stemis] 04/11/2014 19:51

Maybe someone's got wind of something............

[skyship] 04/11/2014 16:58

A positive move - people having to pay 39p yesterday & now 39.5p today...small volume but significant that no stock to greet new buyers.

[badtime] 28/10/2014 19:49

Same as Lee Clark then :)

[tiltonboy] 28/10/2014 18:59

lol... I sold mine today at 38.25p. Happy with a quick return.

[badtime] 28/10/2014 18:18

Sky...i bought a few yesterday...well done :)

[skyship] 28/10/2014 18:04

Analyst - thnx for that. I have those on my monitor, also their Zeros; but not holding either yet...

[analyst] 28/10/2014 17:55

My second speculative punt is based on buying into Berlin property through the Taliesin Property Fund. I can already hear the cat whistles already. Invest in a national residential market that has gone nowhere for a decade? In a country that is about to lunge into another recession? In a region suffering from deep structural currency issues?
All of these criticisms are valid but I think the specifics of this opportunity remain attractive. In trendy East Berlin, property prices are relatively depressed compared to other capital cities but demand from young professionals is very buoyant. And Berlin is midway through a privatisation process which involves a big change in the rules: large leasehold blocks can now be split up and sold off individually as flats.
Guess what happens to the price as this splitting up process kicks in? I think you know the answer. Taliesin has its 1,400 individual units within 65 blocks in its books at a value in the accounts of around €1,575 per square metre. The median price for Berlin apartment sales was €2,770 in the first half of 2014, according to analyst Paul Locke at Westhouse Securities.
He thinks that even these numbers underestimate the true potential. Many of Taliesin’s properties are in areas that are gentrifying and there’s also the chance that the fund will generate decent income as its refurbished properties are let out in the meantime.
According to Mr Locke, if the fund were to sell just 5 per cent of the portfolio at a premium at the market’s median sale price, this would place the fund on a discount of 5.5 per cent. If it were to sell 10 per cent of the portfolio on the same basis, the implied discount would be 12.6 per cent.
The property sale process is about to kick off so we’ll soon see if those numbers are correct. I completely accept that the German economy is a big risk but equally Berlin is in relative terms booming and that will probably continue unless the government puts a stop to the privatisation programme.

[skyship] 28/10/2014 17:33

GP - thnx for the above c&p from the FT. I've finally bought a few of these today - paid 38.44p.

Incidentally, the 2nd para of that article states: "And here are two..."

Could you also c&p the 2nd recommendation?

Thnx

[gingerplant] 25/10/2014 09:03

Traded life policies aren’t dead yet

It’s not been a great few weeks for stock market investors and unfortunately in the short term I don’t think matters will improve much. I’m currently running with 30 per cent cash in my portfolios – and looking around for alternative investment ideas which might offer some genuine diversification benefits.

And here are two. Both are unusual and both trade as closed end funds. Returns are uncorrelated to wider markets, but both also have some fairly obvious risks.
My first idea is a very specialist fund called Alternative Asset Opportunities, which trades on the stock exchange with a tiny capitalisation (£27m). It’s trading at around a 16 per cent discount to net asset value.

In the past, I wouldn’t have touched this sort of fund with even a very long barge pole. It invests in traded life policies, a form of equity release for elderly Americans. The idea is that if you are in need of a cash advance, you relinquish a life assurance policy. The purchaser buys the policy and continues to pay the premiums, but collects the payout when the insured person dies.

Rising life expectancy has played havoc with this kind of product. But the average age of the remaining roughly 75 individuals (and their 85 or more policies) is now about 90. The death rate is inevitably picking up; bad news for them, but good news for the fund which collected $17.4m in maturities over the year to end June and has finally started returning cash to shareholders.

Sterling’s appreciation against the dollar knocked the book value of these US assets in pounds, but the greenback is now back in the ascendant and the mortality arithmetic can only really go one way. On paper, the total value of outstanding policies is around $140m but the fund has them in the books at just $50m. It is still paying premiums for the policies in force. But by my reckoning, if the life expectancy of these retired folk is less than five years the current NAV looks fairly conservative.

The big risk is that a couple of dozen of TLI’s clients could live much longer than the average, in which case it would remain liable for the premiums and shareholders would lose a fortune. But I think the odds are beginning to turn appreciably in TLIs favour.

Not all investors are comfortable with the morality of “death futures”, and the UK regulator certainly doesn’t like them; it has effectively prevented them from being marketed to non-sophisticated investors. But this is a market-listed vehicle that any share trader with the appropriate risk appetite can buy. The great attraction of traded life policies – and one which applies here – is that their returns are completely uncorrelated with those of other asset classes.

[badtime] 24/10/2014 22:34

Any chance of copy and pasting the article :)

[analyst] 24/10/2014 22:14

Traded life policies aren’t dead yet

From the FT:

[davebowler] 15/9/2014 13:04

Extract;

15 September 2014
2
Westhouse Securities
Key for shareholders moving forward remains the val
uation methodology applied by the
fund and this morning’s results announcement provid
es a number of points of confidence in
this methodology. These include the fact that recen
t maturities
“broadly correspond”
according to the board with the LEs under the fund’
s previously revised methodology.
Secondly, the Board has undertaken a process of mar
ket testing, whereby it has actively
sought bids from market participants on a represent
ative selection of policies held within the
portfolio and also sought to
“test the viability of selling the entire portfolio
.”
The board has concluded that
“these exercises suggest that the Board’s valuation
s
correspond closely to market prices and confirm tha
t policies such as the company holds are
attractive to other market participants.”
The apparent validation of the fund’s NAV pricing
by
market participants independent of TLI should, we b
elieve, provide investors with significant
faith in the valuation methodology being provided,
though it should be recognised that
deviations from LE modelling on an individual polic
y basis are natural and should be
expected. Similarly, while taking the positive step
to determine third party valuations of key
elements of the portfolio, the board has restated t
hat it remains its intention to hold the
majority of policies to maturity rather than seekin
g sales in the secondary market.
Providing just a glimpse of the potential enhanceme
nt to NAV that could occur, at end-June
2014, the portfolio offered exposure to 89 life pol
icies (on the lives of 78 individuals), with a
total face value of US$142.5m, against a current va
luation within the NAV of just US$50.2m.
The average age of policy holders was 90.4 years at
end-June. The vast majority of these
assets (65 lives and 83.1% of NAV) are valued with
a remaining LE range of between three
and six years and an average remaining LE of 4.9 ye
ars.
The wide spread between the current valuation and p
otential realisation value of the
portfolio reveals the potential enhancement to NAV
that could occur in this period if current
LE modelling within the portfolio proves to be accu
rate (or even overly conservative).
Historically, of course, LE levels have exceeded es
timations, prompting an extension of the
LE modelling curve, higher resultant costs and a re
duction in the NAV. However, this
morning’s statement from TLI acknowledging greater
matching of LE rates with actual
maturities and the fact that market participants no
w appear willing to pay for the assets at
prevailing valuation levels should we believe, prov
ide significant confidence to the fund’s
approach and valuation methodology.

[davebowler] 15/9/2014 13:01

Westhouse;


This morning has seen the release of annual results for Alternative Asset Opportunities* (TLI.L, -16.4%, Buy), a fund that provides investors with exposure to a basket of life policies or traded Life Interests. These reveal a positive acceleration in both the number and value of policy maturities within the portfolio in the year to June 2014. However, over the reporting period as a whole, the NAV fell by 3.8p or 7.8% (to 44.7p per share), undermined by strength of sterling – a trend that has, of course, been sharply reversed more recently.

[horndean eagle] 10/9/2014 11:05

Sterling weakness vs dollar very welcome for TLI. Should have help next NAV a fair amount.

[playful] 10/9/2014 09:39

We must be due another maturity soon?

[flying pig] 15/8/2014 17:24

Another minor maturity announced adding a tad to the asset value.
I have no wish to see healthy millionaires enjoying life coming to a speedy end but if they are suffering and in distress, perhaps moving on to the senior school above is a kindness?

[papy02] 01/7/2014 22:07

You reckon if 35 of the 90 odd policies expire worthless they will still break even!

A little fewer: ... I'm saying if two thirds of the 47 no-extension policies with face value of $69m as of end 2013 expire worthless (and if all other policies come in on their LE estimate, which is unlikely in that scenario, hence this is just an illustration).

I.e. this is for the NAV in 2019 (+ any prior returns of capital incl the current mooted 2p) to = the current share price (38p).

E&OE (especially wrt my spreadsheeting skills!)

[renew] 01/7/2014 21:20

Cricky. You reckon if 35 of the 90 odd policies expire worthless they will still break even!

[papy02] 01/7/2014 19:02

renew,

maybe I've got the rose-tinteds on, but I am less concerned than you about expiries at age 100:

- the chance of expiries is already priced into the NAV calc, (albeit using TLI's Life Expectancy (LE) estimates)

- TLIs LE estimates have now increased to close to the national average stats.

- this (13/14) year there has been a large uptick in maturities.

- the downside is reasonably protected: I estimate around two thirds of the "no extension" policies could expire worthless before we'd move into loss vs the current share price (obviously if that happened, other policies would be under-performing as well, so this is just an illustration!)

- the upside clearly depends on the current TLI LE estimates proving to be accurate or conservative. There's a long history of wild optimism (based on multiple expensive expert assessments of individual lives incl medical records and social class/wealth etc!). I'm effectively betting we have reached the tipping point.

- note while the insured are not "down and outs", they sold their policies at a steep discount to get their hands on the cash, so they are not the super-rich (now) either.

I agree this issue of expiries at age 100 is important. If I'm wrong I would much prefer you convince me of that rather than find out the hard way!

[renew] 30/6/2014 19:58

Papy
My concern is that people who take out life policies of these sizes are not down and outs and can therefore be expected to have good living conditions and probably access to the best medical facilities. It does not surprise me therefore that they have been defying the standard statistics. Ill personally be very surprised if only 1.5 of the lives concerned make it to 100

[papy02] 29/6/2014 12:09

Hi renew. So you don't buy Wexboy's line of argument on his blog, re these expiries?


Fortunately, the odds are pretty low: Consulting the CDC (non-Hispanic white male & female) tables, we see 89.9 yr olds have a 4.8% (male) & 7.8% (female) chance of surviving to 100+ yrs. But only 46% of policies suffer expiry risk (49 no extension policies, and assuming a 50% payout for 3 reduced death benefit policies). Therefore, just 2.7% of policies will expire worthless, so we'll haircut our policy maturities accordingly (across the board).