Goldman's longevity index has short life

Goldman Sachs Group Inc. is walking away from its QxX index, a longevity index that tracks the life expectancy of those who sell their insurance policies on the secondary market, according to a report in Reuters. “There hasn't been much commercial activity in the index,” Goldman Sachs spokesman Michael DuVally said, confirming that the investment bank is winding down the index. The investment bank started the QxX index about two years ago, releasing a preliminary version of it in January 2008. At the time, the index included a set of 46,000 lives of individuals ages 65 and older with a primary impairment other than AIDS or HIV. A second index, the QxX.LS.2 index, was launched in December of 2008, starting with a pool of 65,655 individuals over the age of 65 with impairments that included cancer, cardiovascular conditions and diabetes. As recently as last February, representatives from Goldman Sachs and Deutsche Bank Securities Inc. touted the potential behind investing in synthetic longevity products that were linked to life settlements. Back then, executives claimed that institutional investors in Europe were increasing their use of synthetic longevity products, while the concept was slow to catch on in the United States. The concept appears to never have really caught on here. Observers attributed Goldman's decision to pull away from the QxX to the fact that few trades were ever executed on it in the first place. “Part of the reason they're shutting it down is because it didn't sell,” said Doug Head, executive director of the Life Insurance Settlement Association. Nevertheless, all the research that went into building the QxX database won't be for naught, he said. “The one thing that's worth noting is that the research that went into the efforts and building the database is probably going to have long-term value,” Mr. Head said. “I think Goldman Sachs benefited from trying to figure out the trend lines in these numbers while they were gathering data. They didn't find a purpose directly linked to the life settlements industry, but they may find other purposes for this mortality research.”