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Alternative Investment Strategy to Eliminate Mark-to-Market Volatility

Updated: Apr 14, 2020

The past two weeks have reminded all of us that the financial impact of mark-to-market risk is real. The financial reality in light of the COVID-19 scare has created another unique investment environment where we see Treasury Bills and other fixed income instruments pushing 0%. Investment News published an article today “T-bills are scarce and the shortage is about to get even worse” talking about the supply squeeze on T-bills as demand for Treasuries soar.

For decades, our firm has been helping corporations leverage corporate-owned life insurance (COLI) as an investment alternative for a portion of cash holdings. We offer institutionally priced products from some of the largest life insurance carriers in the world.

Why evaluate COLI when the market is volatile and interest rates are at historic lows?

Institutionally priced COLI products offer a business the ability to deliver immediate short and long-term cash on cash yields with no mark-to-market risk that are competitive to business accounts like cash management accounts, CDs, treasuries, US government bond funds, and short-term corporate bond funds. The benefits of COLI include immediate tax-deferred earnings as well as insurance death benefit coverage on your key employees. COLI is an excellent tax-deferred alternative investment for corporations to allocate a portion of cash holdings in order to maximize net yields.

The COLI asset can deliver immediate net cash-on-cash yields of 2.50%+. This equates to a pre-tax equivalent return of 3.33% based on a 25% blended tax rate.

Click here to learn more about why our clients invest in Corporate-Owned Life Insurance (COLI) for a portion of their cash holdings to create an immediate liquid asset in order to improve earnings for shareholders, offset emerging liabilities, and leverage the tax savings for returns within a COLI product.

Schedule a call with our team today to discuss how your company can use COLI as an alternative investment delivering short and long-term benefits to your shareholders.

This is not an offer to sell a security or insurance product. This information is provided for informational purposes only and should not be construed as legal or tax advice. You should discuss your circumstances with a financial professional before making any decisions. This material and the opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.

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