Unlisted assets and life insurance: which restrictions?
Unlisted assets are investment products not listed on the stock markets. They are generally for well informed investors who want to diversify part of their investments.
It is possible to hold these assets as underlying assets of a life insurance contract according to the rules issued by the Commissariat aux Assurances.
The types of policy eligible under Circular 15/3 from the Commissariat aux Assurances
Main advantages of unlisted securities in a life insurance policy
Benefit of diversification
Main constraints of unlisted securities in a life insurance policy
|Valuation risk||Liquidity risk|
In the event of:
For example, Private Equity investments may have a life of eight years, which may be extended without any possibility of surrender by the investor.
1 Hedge funds :alternative funds which are private and offer broader investment opportunities than UCITS through the use of derivatives, short selling or leverage, for example. These funds offer attractive remuneration for their managers based on the performance of the vehicle.
2 Debt funds (mezzanine, distressed debt) or private capital funds (venture capital or leveraged buyout). These different forms of investment are each specific in that they contribute to the financing of companies at different stages of their development, or in different parts of the company's capital structure.
3 Direct investments in unlisted companies through equity investments in these companies (ordinary shares, preference shares, convertible bonds).
4 Unlisted real estate funds which do not permit surrender until the end of the fund's term.
5 Unlisted bonds: debt securities issued by private companies which are not traded on regulated markets.
6Hurdle Rate: the threshold above which the fund managers will be able to claim a carried interest (i.e. a performance-related profit share).
It is possible to hold unlisted investments in a Luxembourg life insurance contract, depending on a risk profile and the regulation 15/3 of the Commissariat aux Assurances. It allows to benefit from a wide diversification of the portfolio. However, it is necessary to be aware of the valuation constraints of these assets which are not listed on a regular basis and to the liquidity problems which may arise.