7 May 2014EMEA analysis

Boom in smaller captives attracted to L&C’s cell portfolio solution

London-based wealth manager London & Capital reports strong demand for its cell portfolio solution, specifically introduced for smaller captives.

In the year since launch, over 100 cells have now signed up for the investment solution.

It was launched to provide diversified, bespoke portfolios to SPCs and similar companies to tap into investment returns previously accessible only to larger captives.

Demand is expected to increase even more this year as the team look to build on their success in the US and to target Europe and the Caribbean.

William Dalziel, head of institutional clients at London & Capital says, “We have invested heavily in research and resources to create an effective solution for cells and are committed to the continued development of the market. We are proud of our different approach. We provide innovative solutions and help cells to overcome their existing problems by providing them the opportunity to invest in bespoke portfolios tailored to their needs.

The cell portfolio solution offers cell captives higher targeted returns, a low-risk investment approach, transparency of daily online reporting and access to their own unique account. Segregated portfolios typically boast a low level of volatility, and most importantly in line with a typical captive’s requirements, can be liquidated within just a few days, if required.

Dalziel continues, “Historically cells would be placed into a fund, without consideration of their liquidity needs and risk profile. The success of our initiative is that we are now offering cells a service previously only available to large captives, ensuring their capital contributes to offsetting the cost of their insured risks. Furthermore our experience over the last eight years in the captives market brings with it a track record of delivering effective investment solutions.”

Reflecting on current market conditions, Neil Michael, executive director of investment strategies at London & Capital, adds, “The outlook for captive investment portfolios is positive providing they are constructed and actively managed in line with the prospects for the global economy. Given the fact that captives need to preserve capital, there is generally a larger strategic allocation to conservative assets such as fixed income and possibly a measured exposure to more risky assets such as equities.

“In the current environment, interest rates are likely to continue to remain low, but as economic slack diminishes, government bond volatility will rise. Within fixed income, therefore, we continue to avoid sovereign debt and focus on corporate bonds that have higher yields and superior balance sheet fundamentals. Within equities, our directly-managed strategy focuses on selecting large capitalisation stocks with strong franchises, stable earnings, robust balance sheets, while simultaneously trading at reasonable valuations.”