As this is the Asian board, i thought i would send in a recent article from the Bangkok Post. This is a very special investment vehicle and is considered adventurous. Queries to my e-mail please julianbulman@barclayspencer.com
NET Worth
Mere mortals can now tap Warren Buffet’s and Berkshire Hathaway’s golden goose
For more than three centuries only the very wealthy have had access to the lucrative Lloyd's of London's insurance markets as an investment vehicle. In fact, unless you have at least 5 million in tradable assets, you would not even be considered for admission.
The Lloyd's Insurance Market (formerly Lloyd's of London) controls around 85% of the world's key insurance business in the areas of marine, aviation, catastrophe and professional indemnity. With the claims of 9/11 and the worst hurricane season on record during 2004 now settled, the chimes of profit bells are once again ringing in the halls of Lloyd's. This has been made possible by the introduction of a number of innovations during the 1990s and from 2001-03. One of these innovations was the creation of a company called Equitas.
Equitas was created to deal with the various disasters that caused the panic among the previous Lloyd's syndicates. Most recently it has received the backing of Berkshire Hathaway in the form of a $7-billion additional reinsurance agreement.
In the words of Warren Buffet, the chairman Berkshire Hathaway: ''A decade ago Equitas was launched in order to resolve innumerable problems involving the most complex of insurance issues. Putting Berkshire Hathaway's Gibraltar-like strength behind the remaining problems eliminates any remaining worries for all concerned.''
With Berkshire Hathaway behind Equitas, Lloyd's represents a profitable, streamlined operation in which high net worth individual and corporate investors have been quick to get involved. Although previous access to this lucrative investment vehicle was beyond the reach of mere mortals, the creation of a fund by a company called The London Nominees Ltd has changed all that.
The London Nominees Portfolio Fund 2007 is a specialised wealth-creation vehicle managed in part by the largest and most successful member's agent operating within the Lloyd's marketplace, Hampden Agencies Ltd (HAL), which has regularly outperformed the market as a whole.
The other managing agent is Absolute Asset Management (AAM), which was selected as a strategic partner for its expertise and disciplined approach to investing in non-correlated asset classes. AAM has a global presence and has been managing money on a private placement basis for 10 years, as well as managing a number of fund mandates.
Lloyd's is an insurance market where members provide capital through insurance syndicates. It is essential that capital providers utilise the services of a member's agent, such as HAL, which selects underwriting on their behalf.
Capital is pledged, not directly invested in the insurance market, so investors will be eligible to receive a return from profitable insurance underwriting as well as continue to benefit from the gains of the invested assets that back the underwriting. The amount of capital pledged provides 2.5 times insurance cover; resulting profits are geared at 2.5 times also.
The fund will deposit up to 40% of its investment money with Lloyd's to secure 100% participation in Lloyd's insurance syndicates via a Nameco _ The London Nominees Portfolio 2007 (UK) Ltd, a limited-liability UK company. HAL will act as members' agent to the Nameco and arrange capacity acquisitions in Lloyd's syndicates on the fund's behalf.
Nameco’s are UK limited-liability companies that provide capital to the market. Whereas insurance provision was previously undertaken at Lloyd's with unlimited liability, Nameco’s are only liable to the limit of the company's capitalisation, thereby limiting exposure. The London Nominees Portfolio Fund 2007 utilises a Nameco structure to a maximum 40% of fund value, therefore further limiting the insurance exposure.
The balance of the money will be invested with the appointed fund manager, AAM, which will utilise two strategies: foreign-exchange trading, and macro diversification in a portfolio of equities, bonds and other investments that may cover most, or all, of the major global economic regions. It is anticipated that US dollar assets will form the core of the portfolio.
The company will also invest in units or shares in collective investment schemes and trusts including any other investment funds created by the investment adviser, and direct equities listed on recognised stock exchanges. Cash reserves may also be held to meet future investment opportunities and the fund redemptions.
Past performance has been 35.68% in 2003 and 13.09% in 2004. Note that the figures represent combined actual performance of the three investment strategies used and FAL (fixed interest cash deposit). Hampden's 2005 performance was not available at publication time, Absolute Asset Management Strategies' performance is available from 2003.
LNPF 2007 AT A GLANCE
Type of Investment: Partially closed-end 8-year fund
Size: Restricted to US$100 million
Investment Profile: Adventurous
Objective: Wealth creation
Subscription date: until Dec 31.
Next week, we will discuss the creation of the Lloyd's Franchise Board, which sets the parameters for all involved in the Lloyd's Insurance Market and how that can benefit investors. |
