Longevity as an asset class has been in existence for over twenty years and as the name suggests, is an investment risk centred around how long people live. It has low volatility because life expectancy changes are slow to emerge and low correlation because mortality tends to be independent of the financial markets.

Micro versus macro longevity

Longevity is typically segregated into two types: micro and macro longevity. Micro longevity includes such investment products as reverse mortgages, life tenancies and life settlements and a pool of individual lives. Macro longevity relates to the general population and is generally represented by a larger sample size in the tens of thousands of lives, for example a pension fund's pool of annuitants.

Why invest in longevity?

Compared to other alternative asset classes, longevity can provide attractive and predictable returns with low volatility and minimal market correlation which appeals to a wide range of investors, particularly those targeting inflation-beating returns and capital preservation.

Because longevity relies on the duration of the life expectancy of the insured and not on the market price of a fund of stocks and shares, for example, it is not subject to the same vagaries of the financial markets thus making it more predictable, which can be a useful tool for investment managers when deciding on portfolio asset allocation. Introducing longevity into an investment portfolio can add diversity as well as increasing performance and mitigating risk.

What's in it for the investor?

Investing in longevity offers a number of benefits:

• Minimal correlation to the financial markets
• Low volatility because life expectancy changes are slow to emerge and mortality tables are only adjusted every seven years
• Consistent and stable growth
• An income that is not dependent on fluctuating base rates