One Asset Management (ONEAM) is seeking approval from unitholders of its ONE LS4-UI fund to extend the fund's liquidation period by up to five years, as an "unprecedented" liquidity squeeze in the secondary market for US life settlement assets has delayed investor repayments.
The ONE LS4-UI fund, which has assets under management of roughly 3-3.5 billion baht, invests through an offshore master fund in US life settlement assets -- life insurance policies purchased from policyholders and held as investment assets.
According to Sutthiroj Sitiwatananon, chief executive for foreign at ONEAM, the underlying portfolio continues to perform as expected and there has been no deterioration in asset quality.
However, a sharp decline in liquidity in the secondary market has limited the fund's ability to sell assets and return capital to investors within the original time frame.
"The portfolio remains healthy and transparent, with performance progressing in line with expectations," he said. "The issue is a temporary liquidity shortage in the market, not the quality of the underlying assets."
ONEAM said volatility in the global private credit market during the fourth quarter of last year significantly reduced the number of institutional investors willing to purchase life settlement assets. In addition, bids for such assets fell well below their estimated fair value.
Rather than dispose of policies at distressed prices and crystallise losses for investors, the master fund manager decided to retain the assets, expecting market conditions to normalise within 9-18 months.
The liquidity squeeze was compounded by the nature of life settlement investments, which require ongoing insurance premium payments to maintain policy validity.
The fund holds cash reserves equivalent to around 10-20% of net asset value, but those funds are largely earmarked for insurance premiums and operating expenses, leaving limited cash available for immediate redemptions.
To address the situation, ONEAM is proposing to restructure the offshore master fund into a closed-end vehicle with a maximum lifespan of five years. Under the proposed structure, investors would receive repayments progressively as cash is generated from policy maturities, insurance claim proceeds and asset sales.
Mr Sutthiroj said the first repayment could be made in the first half of next year if unitholders approve the proposal, adding investors would not be charged additional management fees during the extended liquidation period.
The company distributed voting materials to unitholders, with an outcome expected by the end of July. The result determines the next stage of discussions with the offshore master fund.
If investors approve the proposal, ONEAM will negotiate with the master fund to convert it into a five-year closed-end structure. The company said the move would ring-fence investors' assets, provide greater visibility on repayment schedules and improve flexibility for transferring fund interests to institutional investors when market conditions improve.
If the proposal is rejected, the master fund may need to adopt liquidity management measures such as redemption gates, which could further delay repayments, require higher cash reserves and limit its ability to dispose of assets efficiently.
ONEAM said it manages several life settlement funds with combined assets of 6-7 billion baht. Principal repayments and fund maturities across those funds are scheduled progressively between 2026 and 2028.
The company reiterated the current difficulties stem from a temporary disruption in market liquidity and weak demand in the secondary market, rather than any deterioration in the underlying US life settlement assets, which it said continue to perform in line with expectations.
