Investors can mitigate the effects of low base rates by investing in life policy settlements, which are benefiting from low demand and prices, according to Policy Selection Limited (PSL).
The firm says low interest rates have not affected its steady returns, and is hopeful that falling demand from institutional investors will help it negotiate lower prices.
With interest rates at a record low of 1.5%, and the recent crash in equity values, PSL's Finance Director, Andrew Walters, says investors should be looking at other asset classes which can provide them with steady returns.
"Stock market volatility in 2008 saw many investors making a flight to cash to shield against falling equity values, but that cash is now doing nothing as the Bank of England has slashed its base rate to the lowest level in history," he says.
Walters says this is particularly problematic for savers approaching retirement, as the real value of their cash is being eroded by inflation.
PSL says investing in life assurance policies can provide steady capital growth, and is actually benefiting from the poor state of the economy.
"Two years there were a lot of institutions in the market bidding for policies, but the downturn has caused a lot of insurers and hedge funds to pull out. There's a plentiful supply of policies, but demand has fallen so it's a buyers market and policies are getting cheaper," Walters explains.
He hopes alternative asset classes, which are not affected by other economic developments, will become increasingly attractive to investors looking for a dependable return.
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]IFAonline
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