Longevity Financial Instruments Recommendation
TOTAL SCORE: 10
Score
A1 (Feasibility increased by continuance of pandemic): 0
A2 (Necessity increased by covid pandemic): 0
A3 (political viability): 0
B1 (Relevance to the specific goal of increasing HALE by 5 years by 2035): +1
B2 (Relevance to general goal of biomedical healthy life extension): +1
C1 (Market readiness applicability): +1
C2 (Project readiness): 0
C3 (Move to market readiness): +1
D1 (Actionability): +1
D2 (Degree of measurability): +1
D3 (Degree of leveraging cross-sector inputs): +1
D4 (Awareness of international context): 0
D5 (Resourcefulness): +1
D6 (Reorganisation): +1
E (Disruptiveness): +1
F (Dividends - does the recommendation aid in social activity and inclusivity?): 0
RECOMMENDATION SUMMARY
Of all the factors and industry components that limit the ongoing growth of the Longevity Industry, and can enable the simultaneous acceleration of its developmental trajectory and the stabilization of its prospects as an industry, it is liquidity. While Longevity IPOs enable exposure to an increasing number of retail investors, there are many other mechanisms, systems and approaches to increasing the amount of institutional and retail investor exposure to the Longevity Industry, which have not yet been leveraged to their full potential.
There are enormous near term opportunities for liquid Longevity indices and derivatives focused at individual investors (and HNWIs in particular), that enable exposure to the rising tide of the global Longevity Industry. This is a key mechanism for matching wealthspans to rising healthspans. Such products are evolving to create liquidity in derivatives that have historically been illiquid or have had no liquidity. Existing InvestTech solutions have the potential to give investors exposure to relevant Longevity companies in a highly liquid and tradable manner, but are not being utilized sufficiently.
Several major investment banks have introduced Longevity-themed baskets and portfolios tied to various sectors of the Longevity Industry. The objective is to give the massive global investment community exposure to the rapidly growing Longevity Industry. Some specific examples include AXA's WF Framlington Longevity Economy Fund, and Julius Baer's Longevity Basket Tracker Certificate. The only drawbacks of such companies and funds is that they are limited to publicly-traded companies when the vast majority of true Longevity companies are privately held, and they are only very weakly and superficially tied to the actual Longevity Industry partly as a result of being limited to public companies. Thankfully, there are existing InvestTech solutions and liquidity-generating approaches that can neutralise what we refer to as the Big Longevity Liquidity Gap.
During the past several years, a quite clear disproportion has emerged between various DeepTech sectors, in particular between the Longevity start-ups on the one hand, and the entire business model of venture capital funds on the other. There have also been big gaps and disruptions in the global financial system. There is a highly relevant big gap between progress in science and technology, and the outdated bureaucracy, in which most financial institutions remain mired, as though both exist in parallel universes.
This is happening for multiple reasons: At one end, DeepTech start-ups (including Longevity start-ups) have been suffering from a lack of access to relevant levels of seed investment. Although venture funds are by definition supposed to prioritise investments into the most disruptive technologies and start-ups, in reality, most of them prefer to specifically avoid DeepTech sectors, or to enter investment rounds at much later stages. As a consequence, the start-ups are forced to deal with angel investors. This creates a growth gap phenomenon known as the “Death Valley”: 99% of DeepTech start-ups do not survive the stage of growth between seed financing and the beginning of revenue generation or even “A” rounds.
Meanwhile, at the other end, there is an extreme abundance of significant assets being held and preserved in bank accounts or in comparatively stable derivatives on a scale of tens of trillions. For instance, there is a tremendous volume of money on the scale of at least €1 trillion currently being stored in Swiss bank accounts with negative interest rates, which is an illogical phenomenon of a modern financial world itself. Yet the owners of these financial assets would nonetheless prefer to avoid investing them into venture funds, who are equally reluctant to invest into Longevity start-ups. Thus, the major source of these disproportions comes down to the issue of illiquidity.
There are many thousands of HealthTech startups and hundreds of Longevity start-ups in the UK, EU, USA and Asia-Pacific region and 99% of them are not publicly traded, which means that they are limited to seeking funding from angel investors and venture investors, which represents a very small fraction of the available global wealth. This situation creates an extreme funding deficit and illiquidity problem. This is a problem facing almost all DeepTech sectors, but the negative repercussions are particularly bad for the Longevity Industry, as it leads on the individual level to reduced quality of life and unnecessary deaths, and threatens to inflict crippling economic effects on national healthcare systems, pension and social security systems, and economies.
Therefore, an extreme abundance of financial assets ends up preserved rather than invested. There are enormous amounts of financial assets being conserved within the umbrella of family offices (and we can estimate that there are around 5,000 of these) and hundreds of very conservative financial institutions, which hoard this capital simply due to a lack of safe, stably growing and predictable financial derivatives into which to invest. There is no relevant methodology to assess the amount of such assets, as they tend to keep this a secret. But this is at least several tens of trillions of dollars.
At the same time, many owners of these vast sums of wealth are nonetheless personally interested in Longevity, both as a prospective market with the capacity for unprecedented growth, and as a means to their own personal life extension. Even the most conservative investors, and the owners of the largest financial assets, now very clearly understand that the industries of AI and Longevity, separately, are two of the most prospective and relevant sectors to invest in, with full confidence that such investments will lead to relatively low-risk and stable profitability in the long term.
However, due to the lack of liquid tradable instruments related to the AI and Longevity industries, owners and managers of these assets still prefer to avoid any significant investments into these sectors. And in many cases, angel and venture investors are operating as sharks, exploiting this gross illiquidity for their own financial advantage, to the detriment of Longevity and other DeepTech start-ups. Therefore, financial innovations that can provide liquidity to Longevity companies and technologies, and form a bridge between the Longevity Industry and conservative financial markets, would inevitably enable the injection of something around 1% of the tens of trillions of dollars currently lying inert as "lazy money" within the global Longevity Industry.
In practice, this means that once such a liquidity bridge is established, it will have an immediate ability to attract around 300- 500 billions dollars, pessimistically, just within the first few years and at least several trillions within a 5-7 years horizon. Currently, the typical approach of these family offices and large financial institutions is to allocate 10% into alternative investments. Our most pessimistic estimate is that 10% of that wealth could be reasonably invested into the Longevity Industry, but only under one very specific condition: that mechanisms exist to provide investors with enough liquidity to be able to withdraw at least some of their investment within more reasonable timeframes than the typical lock-in periods of venture capital firms.
Considering the current natural pace of innovation in the Longevity and Financial industries, even without any specific innovations in the InvestTech field, the current problem of illiquidity will likely be resolved naturally in 7 to 10 years, but with these new bridges in place, within 3 to 5 years. It is important that these solutions take into account the interests of both groups — start-ups wishing to acquire additional funding, and conservative investors wishing to keep their funds in secure tradable financial instruments. In the meantime, one method of dealing with illiquidity is the creation of more modern hybrid investment funds, which would serve as the above-mentioned bridge between conservative investors and Longevity start-ups, and can provide more liquidity for investors (LP’s) in comparison with the usual venture funds. Elements of such solutions are already present in other industries and can be returned and further improved using the modern tools of financial engineering and InvestTech.
Longevity based derivatives are going to be a preferred option for investors such as survivor bonds which pay a coupon based on the "survivorship" of a stated population group along with Longevity notes which reference a pool of pre-defined lives. Due to the rise in such Longevity themed financial instruments and investment options, the government mortality Indices will be closely watched in the coming years. There will also be a significant increase in investment to adapt existing technologies and infrastructure to the aging population.
Today, the majority of Longevity indices and derivatives are packaged as risk management solutions. The current synthetic Longevity products are emerging Longevity indices, Longevity notes, Longevity swaps and other Longevity derivatives such as survivor bonds. The attraction of Longevity based financial products that take on Longevity risk is that they are standardized and tradable which allows massive liquidity to larger institutions that buy them such as pension funds and asset management companies. Since the Longevity risk on insurance and annuity contracts are swappable the secondary insurance market might see minimal increases in liquidity although life insurance products and annuities might not necessarily be extremely liquid in the future. These kinds of practices are the simplest and least modern form of this general trend.
We can also envision the emergence of financial instruments and analytical tied to biomarkers of aging (which serve as proxies for measuring the current state of individuals and populations’ biological aging), and to the technological and scientific validation of Longevity companies therapeutic pipelines the more modern and sophisticated approaches to safe human experimentation and validation described in the third article of this series.
More specifically, we envision the development of 3 types of analytical products. All of these products will be derived from sets of biomarkers of aging and Longevity, and panels of biomarkers which are off the shelf analytical dashboards:
An analytical panel will be launched for hedge funds and investment banks to predict success or failure of particular molecules in the later stages of clinical trials and provide investors with the signals to form long or shorting positions.
Technological due-diligence for venture investors to evaluate the claims of emerging companies whether their technologies can deliver actual results on humans will be made available in detailed formats.
An analytical panel could also be launched for InsurTech-HealthTech companies focused on the retails clients. Currently we are aware of at least 6 companies working on similar types of solutions, and we can envision the emergence of another 10-20 such companies in the next 2-3 years.
Depending on the management, scientific team, and business executive team, we will see a variety of specific structuring of biomarker panels and actual analytical/financial products based on them.
Score
A1 (Feasibility increased by continuance of pandemic): 0
A2 (Necessity increased by covid pandemic): 0
A3 (political viability): 0
B1 (Relevance to the specific goal of increasing HALE by 5 years by 2035): +1
B2 (Relevance to general goal of biomedical healthy life extension): +1
C1 (Market readiness applicability): +1
C2 (Project readiness): 0
C3 (Move to market readiness): +1
D1 (Actionability): +1
D2 (Degree of measurability): +1
D3 (Degree of leveraging cross-sector inputs): +1
D4 (Awareness of international context): 0
D5 (Resourcefulness): +1
D6 (Reorganisation): +1
E (Disruptiveness): +1
F (Dividends - does the recommendation aid in social activity and inclusivity?): 0
RECOMMENDATION SUMMARY
Of all the factors and industry components that limit the ongoing growth of the Longevity Industry, and can enable the simultaneous acceleration of its developmental trajectory and the stabilization of its prospects as an industry, it is liquidity. While Longevity IPOs enable exposure to an increasing number of retail investors, there are many other mechanisms, systems and approaches to increasing the amount of institutional and retail investor exposure to the Longevity Industry, which have not yet been leveraged to their full potential.
There are enormous near term opportunities for liquid Longevity indices and derivatives focused at individual investors (and HNWIs in particular), that enable exposure to the rising tide of the global Longevity Industry. This is a key mechanism for matching wealthspans to rising healthspans. Such products are evolving to create liquidity in derivatives that have historically been illiquid or have had no liquidity. Existing InvestTech solutions have the potential to give investors exposure to relevant Longevity companies in a highly liquid and tradable manner, but are not being utilized sufficiently.
Several major investment banks have introduced Longevity-themed baskets and portfolios tied to various sectors of the Longevity Industry. The objective is to give the massive global investment community exposure to the rapidly growing Longevity Industry. Some specific examples include AXA's WF Framlington Longevity Economy Fund, and Julius Baer's Longevity Basket Tracker Certificate. The only drawbacks of such companies and funds is that they are limited to publicly-traded companies when the vast majority of true Longevity companies are privately held, and they are only very weakly and superficially tied to the actual Longevity Industry partly as a result of being limited to public companies. Thankfully, there are existing InvestTech solutions and liquidity-generating approaches that can neutralise what we refer to as the Big Longevity Liquidity Gap.
During the past several years, a quite clear disproportion has emerged between various DeepTech sectors, in particular between the Longevity start-ups on the one hand, and the entire business model of venture capital funds on the other. There have also been big gaps and disruptions in the global financial system. There is a highly relevant big gap between progress in science and technology, and the outdated bureaucracy, in which most financial institutions remain mired, as though both exist in parallel universes.
This is happening for multiple reasons: At one end, DeepTech start-ups (including Longevity start-ups) have been suffering from a lack of access to relevant levels of seed investment. Although venture funds are by definition supposed to prioritise investments into the most disruptive technologies and start-ups, in reality, most of them prefer to specifically avoid DeepTech sectors, or to enter investment rounds at much later stages. As a consequence, the start-ups are forced to deal with angel investors. This creates a growth gap phenomenon known as the “Death Valley”: 99% of DeepTech start-ups do not survive the stage of growth between seed financing and the beginning of revenue generation or even “A” rounds.
Meanwhile, at the other end, there is an extreme abundance of significant assets being held and preserved in bank accounts or in comparatively stable derivatives on a scale of tens of trillions. For instance, there is a tremendous volume of money on the scale of at least €1 trillion currently being stored in Swiss bank accounts with negative interest rates, which is an illogical phenomenon of a modern financial world itself. Yet the owners of these financial assets would nonetheless prefer to avoid investing them into venture funds, who are equally reluctant to invest into Longevity start-ups. Thus, the major source of these disproportions comes down to the issue of illiquidity.
There are many thousands of HealthTech startups and hundreds of Longevity start-ups in the UK, EU, USA and Asia-Pacific region and 99% of them are not publicly traded, which means that they are limited to seeking funding from angel investors and venture investors, which represents a very small fraction of the available global wealth. This situation creates an extreme funding deficit and illiquidity problem. This is a problem facing almost all DeepTech sectors, but the negative repercussions are particularly bad for the Longevity Industry, as it leads on the individual level to reduced quality of life and unnecessary deaths, and threatens to inflict crippling economic effects on national healthcare systems, pension and social security systems, and economies.
Therefore, an extreme abundance of financial assets ends up preserved rather than invested. There are enormous amounts of financial assets being conserved within the umbrella of family offices (and we can estimate that there are around 5,000 of these) and hundreds of very conservative financial institutions, which hoard this capital simply due to a lack of safe, stably growing and predictable financial derivatives into which to invest. There is no relevant methodology to assess the amount of such assets, as they tend to keep this a secret. But this is at least several tens of trillions of dollars.
At the same time, many owners of these vast sums of wealth are nonetheless personally interested in Longevity, both as a prospective market with the capacity for unprecedented growth, and as a means to their own personal life extension. Even the most conservative investors, and the owners of the largest financial assets, now very clearly understand that the industries of AI and Longevity, separately, are two of the most prospective and relevant sectors to invest in, with full confidence that such investments will lead to relatively low-risk and stable profitability in the long term.
However, due to the lack of liquid tradable instruments related to the AI and Longevity industries, owners and managers of these assets still prefer to avoid any significant investments into these sectors. And in many cases, angel and venture investors are operating as sharks, exploiting this gross illiquidity for their own financial advantage, to the detriment of Longevity and other DeepTech start-ups. Therefore, financial innovations that can provide liquidity to Longevity companies and technologies, and form a bridge between the Longevity Industry and conservative financial markets, would inevitably enable the injection of something around 1% of the tens of trillions of dollars currently lying inert as "lazy money" within the global Longevity Industry.
In practice, this means that once such a liquidity bridge is established, it will have an immediate ability to attract around 300- 500 billions dollars, pessimistically, just within the first few years and at least several trillions within a 5-7 years horizon. Currently, the typical approach of these family offices and large financial institutions is to allocate 10% into alternative investments. Our most pessimistic estimate is that 10% of that wealth could be reasonably invested into the Longevity Industry, but only under one very specific condition: that mechanisms exist to provide investors with enough liquidity to be able to withdraw at least some of their investment within more reasonable timeframes than the typical lock-in periods of venture capital firms.
Considering the current natural pace of innovation in the Longevity and Financial industries, even without any specific innovations in the InvestTech field, the current problem of illiquidity will likely be resolved naturally in 7 to 10 years, but with these new bridges in place, within 3 to 5 years. It is important that these solutions take into account the interests of both groups — start-ups wishing to acquire additional funding, and conservative investors wishing to keep their funds in secure tradable financial instruments. In the meantime, one method of dealing with illiquidity is the creation of more modern hybrid investment funds, which would serve as the above-mentioned bridge between conservative investors and Longevity start-ups, and can provide more liquidity for investors (LP’s) in comparison with the usual venture funds. Elements of such solutions are already present in other industries and can be returned and further improved using the modern tools of financial engineering and InvestTech.
Longevity based derivatives are going to be a preferred option for investors such as survivor bonds which pay a coupon based on the "survivorship" of a stated population group along with Longevity notes which reference a pool of pre-defined lives. Due to the rise in such Longevity themed financial instruments and investment options, the government mortality Indices will be closely watched in the coming years. There will also be a significant increase in investment to adapt existing technologies and infrastructure to the aging population.
Today, the majority of Longevity indices and derivatives are packaged as risk management solutions. The current synthetic Longevity products are emerging Longevity indices, Longevity notes, Longevity swaps and other Longevity derivatives such as survivor bonds. The attraction of Longevity based financial products that take on Longevity risk is that they are standardized and tradable which allows massive liquidity to larger institutions that buy them such as pension funds and asset management companies. Since the Longevity risk on insurance and annuity contracts are swappable the secondary insurance market might see minimal increases in liquidity although life insurance products and annuities might not necessarily be extremely liquid in the future. These kinds of practices are the simplest and least modern form of this general trend.
We can also envision the emergence of financial instruments and analytical tied to biomarkers of aging (which serve as proxies for measuring the current state of individuals and populations’ biological aging), and to the technological and scientific validation of Longevity companies therapeutic pipelines the more modern and sophisticated approaches to safe human experimentation and validation described in the third article of this series.
More specifically, we envision the development of 3 types of analytical products. All of these products will be derived from sets of biomarkers of aging and Longevity, and panels of biomarkers which are off the shelf analytical dashboards:
An analytical panel will be launched for hedge funds and investment banks to predict success or failure of particular molecules in the later stages of clinical trials and provide investors with the signals to form long or shorting positions.
Technological due-diligence for venture investors to evaluate the claims of emerging companies whether their technologies can deliver actual results on humans will be made available in detailed formats.
An analytical panel could also be launched for InsurTech-HealthTech companies focused on the retails clients. Currently we are aware of at least 6 companies working on similar types of solutions, and we can envision the emergence of another 10-20 such companies in the next 2-3 years.
Depending on the management, scientific team, and business executive team, we will see a variety of specific structuring of biomarker panels and actual analytical/financial products based on them.