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Reports and Commentary from the Investment World Index  |
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Endowment Policy Trusts[2006-02-01] |
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Endowment Policy Trusts. 2006-02-01 Pick up a bargain in the second hand shop. In the last 3 years, With Profits Endowments have gone from the cautious investor’s favorite to deeply unfashionable. But, as we know, often the best way to make money is not to follow the crowd. This could now be the case with endowment policies, as there are more sellers than buyers. There are two Endowment Trusts that we now consider to be at a deep discount to their true worth at maturity: Allianz Dresdner Second Endowment Policy Trust plc 2006.
Returns to shareholders are intended to be entirely in the form of capital growth, as an efficient way for investors to participate in the mid – term endowment policy market. The Trust has invested in policies from a wide range of U.K Life companies, mostly household names. The policies have been in force between 5 – 20 years, and will be held to maturity before winding up on 30th September 2006. *Assumes no further demutualisations , receipts or death benefits and no further purchases or sales of policies. Total Assets = Sterling 38.8 Million. Discount to Net asset value = 9.1% Another Investment Trust with a longer maturity date is at an even bigger discount to net asset value: Allianz Dresdner Second Endowment Policy Trust plc 2009.
Returns to shareholders are intended to be entirely in the form of capital growth, as an efficient way for investors to participate in the mid – term endowment policy market. The Trust has invested in policies from a wide range of U.K Life companies, mostly household names. The policies have been in force between 5 – 20 years, and will be held to maturity before winding up on 31st December 2009. *Assumes no further demutualisations , receipts or death benefits and no further purchases or sales of policies. Discount to net asset value = 19.5% The underlying investments for both these Trusts are With Profit Endowment policies. With Profit policies are designed to "smooth" out the ups and downs of stockmarket volatility. This is done by the insururer bulding up reserves in the good years that can be paid out in the bad, to try to maintain returns to policy holders. Each year the insurer declares an annual bonus rate that policy holders will receive. Once paid out , this bonus can not be removed. For the more cautious investor, a lump sum invested into either of these Trusts now, could provide a very reasonable return on what is fundamentally a cautious investment product. |
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Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.
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