Traymar Capital, an insurance-linked manager set up in late 2009, opened an Asian office in mid-June with the aim of selling its first fund to institutional investors.
Chris Hodgeman has joined the London-based firm to run the regional business out of Hong Kong as partner for Asia-Pacific and the Middle East. He is responsible for developing Traymar’s activities in those markets.
The aim is to take advantage of appetite for insurance-linked assets by institutional investors across the region, says Hodgeman. Traymar is marketing its first life-settlement fund, the Microlife Fund, and targets a first close late this year or early next.
Life-settlement is based on US universal or whole of life insurance policies owned by older individuals who no longer have any need for coverage and hence want to sell them into the market to monetise their value. They could surrender them to the original insurer, but they would only get a small surrender value; the policies can potentially fetch more in the secondary market.
Hodgeman has 20 years' experience in financial markets, most recently as Asia-Pacific head of the longevity markets group at Credit Suisse in Hong Kong, a role he left late last year. Before that he worked at ABN Amro in a similar role.
Joining Traymar reunites him with two former colleagues who founded the firm. Henry Kus was global head of structured insurance products trading at ABN Amro, and Bjorn Schmolck was also at the Dutch bank and ran the longevity trading and structuring group. They are two of seven staff in London.
Traymar has spent the past 18 months developing the product. “They needed to do a huge amount of research into mortality modelling and setting up the infrastructure for this fund,” says Hodgeman.
It’s a closed-end, private-equity type structure with an expected life of around seven years. “We expect that everyone will be out after that, but we can’t guarantee that,” says Hodgeman, adding that this is a semi-liquid market. The fund is targeting 13-16% annualised returns after fees.
The fund’s capacity is $400 million, and he expects the vast bulk of capital to come from institutions such as insurance firms, pension funds and sovereign wealth funds. But Traymar doesn’t rule out speaking to family offices and ultra-high-net-worth individuals.
Asian insurance companies should see the fund as a standalone investment rather than as a tool for matching or hedging their liabilities, Hodgeman argues, because US mortality rates may be substantially different from those of a Taiwanese insurer, for example.
In the past, a lot of the flows into these types of products have come from Europe, he notes, but given the macroeconomic problems there now, Asia may offer a better option for capital-raising currently.
Traymar will consider creating segregated mandates, but only if the figures were big enough. Hodgeman says it wouldn’t make economic sense for the client to set up a separate account for less than $100 million, since otherwise it would not provide sufficient portfolio diversification. They also intend to provide consulting advice on existing life-settlement investments.
In terms of expanding the office, Hodgeman says the firm’s first priority is developing the business and, if that goes well, further hires are likely.