Life settlements broker Invescor Ltd. has shut down, citing sluggish demand for the alternative investments last year.
“You were looking at a perfect storm: The capital markets were constricted, and those who were buying policies were buying them low,” said Michael Leibowitz, president and chief executive.
Mr. Leibowitz made the announcement last Thursday in a memo to the firm's associates, and news of the closing was first reported in The Life Settlements Report. Invescor officially closed July 1.
In its life settlements business, Invescor was paid based on the offer price investors quoted for a life insurance policy. But that activity slowed down last year and into the beginning of this year as institutional investors purchased fewer policies. Some firms, like Goldman Sachs Group Inc., abandoned the market.
Some of that institutional investor activity is coming back, but the offers are still very low, and the investors remain very selective about the policies they want to buy, Mr. Leibowitz said.
“There are different business models that work in different business environments, and right now, it's just not enough volume to continue operating in that business model,” he added. The firm doesn't expect to go back into the life settlements marketplace in the near future.
Invescor's broker-dealer — Invescor Wholesale BD Inc. — was also part of the life settlements operation, but for now, the firm won't be shut down, Mr. Leibowitz said. He said he wasn't at liberty to discuss the broker-dealer in greater detail.
Observers noted that recent exits from the life settlements industry could make room for new participants.
“There will always be an ebb and flow in terms of funding sources, but certainly, investment banks and broker-dealers aren't the big players,” said Christian Evulich, vice president of business development at Amrita Financial Inc., a settlements broker. The new money is coming from domestic and international hedge funds in Europe and Asia, along with pension funds overseas, he noted.
The slowdown in activity seems to have given way to a broader range of policies — some as low as $100,000 in face value — getting offers from investors and an increase in funding sources, Mr. Evulich said.
But the numbers don't seem to bear that out just yet. The Amrita Life Settlement Index, which measures demand for insurance policies on the secondary market, hit 460 in June, down 14.3% from May's index level of 536.6.
“We're not alarmed that there are others exiting the business, and we wouldn't be surprised if there were others,” said Mr. Evulich. “Finding adequate funding has been a challenge for all types of investments over the last couple of years.”