In an uncertain global economic climate, marked by geopolitical instability and financial market volatility, investors are increasingly seeking to diversify their portfolios to optimize performance while managing risk. Among the emerging solutions, private assets are emerging as an attractive alternative to traditional financial assets. These investments include private equity, infrastructure funds, private debt, and real estate, and are seen as tools for diversification and attractive return opportunities, although their low liquidity and complexity make them riskier and less transparent.
At Vitis Life, a Luxembourg-based life insurance company, we have developed unique expertise in integrating these private assets into life insurance policies, thereby offering a tailor-made solution to our clients. As a trusted partner, we combine flexibility, rigor, and responsibility in managing these assets to meet the diversification and performance requirements of sophisticated investors, while taking into account the specific characteristics of this particular asset class.
Over the past five years, these private assets have become increasingly accessible, attracting a growing number of investors eager to broaden their horizons while seeking to maximize their returns.
Private assets provide access to the real economy and to emerging companies shaping the future. Due to their less liquid nature, they have historically offered higher returns and lower volatility compared to traditional financial assets. Furthermore, these assets have a low correlation with publicly traded assets, which can reduce overall portfolio volatility and improve resilience to financial market fluctuations.
“Private assets, referred to as Illiquid Assets (ALR) at Vitis Life, encompass all financial assets approved by the CAA’s circulars that meet one of the following conditions:
- The asset has no public price and/or is not traded on a regulated stock exchange, such as private equity, infrastructure, private debt, or real estate funds,
- The asset does not meet the definition of an open-end fund according to the CAA’s circulars (in other words, there is no guarantee of redemption at least once a month)
“For a U/HNWI, the share of private assets in a portfolio generally ranges between 10% and 30%, although it can go well beyond that in some cases,” explains Zulmiro Da Costa, Chief Commercial Officer at Vitis Life. However, integrating private assets into a life insurance contract requires a rigorous approach and tailored management, as these assets present specific challenges in terms of administrative burden, liquidity, and regulation. “In an insurance context, the main challenges of this asset class lie in the lack of liquidity guarantees, the fact that these assets are not traded on traditional financial markets, or that they require closer monitoring due to their complexity,” explains Maxime Leclet, Private Markets Manager at Vitis Life. These characteristics require enhanced governance, precise monitoring of cash flows, and rigorous valuation to manage risks.
At Vitis Life, we offer a flexible investment scope for ALRs and rigorously monitor them within life insurance portfolios. For example, we ensure that each investment complies with the requirements of CAA Circular 15/3 or that they are made in line with the investment strategy defined by the client. This approach allows our clients to confidently benefit from exposure to promising sectors while optimizing their portfolio’s resilience in the face of uncertainties in traditional financial markets.
Moneta Asset Management: An Innovative Strategy to Optimize ALR Liquidity
Private assets, while attractive, are illiquid. It is in this context that Moneta Asset Management’s funds, through their differentiated approach, provide concrete solutions to optimize the management of private assets. Moneta adopts a specific strategy that enables better liquidity management. “Our closed-end funds allow us to capture opportunities in less liquid assets at attractive prices, while avoiding the pressure of massive redemptions during periods of market turbulence,” explains Bo Huang Launois, Investor Relations Manager in charge of international development at Moneta Asset Management. This approach allows Moneta to position itself in illiquid assets, capitalize on market opportunities, and offer investors exposure to asset classes that Moneta Asset Management considers to have high potential, while preserving portfolio stability.
Moneta implements strategies designed to optimize the management of ALRs while preserving their long-term returns. Their closed-end funds allow them to focus on longer-term horizons without facing liquidity constraints, thereby offering managers greater strategic freedom. In addition, active management of valuations and specific indicators ensures maximum transparency while maintaining investment performance during periods of volatility.
Liquidity Optimization and Cash Flow Management: A Flexible and Empowering Strategy
Vitis Life has implemented effective mechanisms to make it easier for its clients to manage the liquidity required for the contract to function. Among these mechanisms, we have established supplementary agreements that take into account the cash flows and constraints specific to this asset class.
Vitis Life also addresses the challenge of managing the liquidity of illiquid assets within its Luxembourg life insurance contracts. “One of the main challenges of illiquid assets is precisely their low liquidity, which can limit exit opportunities for investors. However, through agreements entered into prior to each investment, it is possible in certain cases to implement specific solutions to mitigate this low liquidity,” adds Maxime Leclet. Such solutions allow for the structuring of customized liquidity options to meet investors’ needs, whether in the event of death, redemption, or arbitrage. For example, secondary market solutions can be utilized to facilitate investors’ exit when possible.
Vitis Life also ensures that it maintains a continuous and accurate valuation of private assets, even if these are not revalued as frequently as listed assets.
Investor Profile and ALR Selection Criteria
Investors interested in private assets must be aware of and understand the risks associated with this asset class. “While strictly adhering to the provisions of Circular Letter 15/3 from the Insurance Commission (CAA), we have implemented additional criteria to avoid increasing certain risks, particularly for clients who are most financially vulnerable,” explains Zulmiro Da Costa.
At Vitis Life, only Type C or D contracts can include these private assets, with a minimum investment threshold of €100,000 per private asset. Our analysis of private assets goes far beyond mere compliance with prudential rules. We conduct an analysis of the underlying assets, incorporating both financial and non-financial criteria, to ensure that the assets meet the requirements set by Vitis Life.
Vitis Life and Moneta Asset Management: Enhanced Collaboration to Optimize the Liquidity of ALRs
To facilitate the management of illiquid assets (ALR), Vitis Life and Moneta have established contractual agreements to ensure better liquidity management. Two main scenarios may arise:
- Death of the policyholder: The fund’s contractual documentation allows the insurer to request the redemption of its position at a monthly or quarterly net asset value, ensuring liquidity for the policy beneficiaries.
- Redemption of the contract by the policyholder: In this case, the position must be sold over-the-counter via a secondary market. Moneta then endeavors to match the insurer’s sale with a purchase by an existing or new investor. Although this is not explicitly provided for in the fund’s contractual documentation, this practice may be implemented to facilitate liquidity on a “best efforts” basis.
If liquidity cannot be ensured, the position may nevertheless be transferred, as provided for in the agreements established between Vitis Life and Moneta prior to each investment.
Comprehensive expertise to maximize the potential of ALRs
Illiquid assets, although more complex and less liquid than traditional financial assets, represent a strategic opportunity for savvy investors seeking access to an asset class that offers diversification and potentially higher returns. Through responsible, rigorous, and transparent management, Vitis Life enables its clients to fully benefit from the opportunities offered by private assets, while minimizing the associated risks. Luxembourg life insurance contracts thus provide a secure, flexible, and tax-optimized framework to unlock the full potential of these investments, while offering dedicated administrative services to investors and partners, facilitating the management and monitoring of private assets.
