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FIRST EVER COMMERCIAL MORTGAGE WHOLE LOAN INDEX BASED ON ACTUAL PERFORMANCE DATA
LifeComps Announces New Investment Benchmark
Boston, MA, December 9, 2003 -- A new index providing never before published performance data for the commercial real estate mortgage asset class was announced today by a consortium of life insurance companies. The LifeComps Commercial Mortgage Index is the first and only published benchmark for the large private commercial mortgage market based on actual historical data that enables investors to compare their commercial mortgage loan performance with the market aggregate as well as other investment asset classes.
The LifeComps Index is published quarterly, 60 days after the end of each quarter, in compliance with antitrust guidelines determined by counsel. Results for the third quarter 2003 show that total return for the quarter was -.581% comprised of 1.681% income and a negative price return of -2.263%. The weighted average duration was 4.27 years. The rolling four quarters (10/1/2002 through 9/30/2003) total return was 6.349% of which 7.127% was income and -.779% price return. The negative price return is due to an increase in intermediate and short term U.S. Treasury yields over the period.
The LifeComps Commercial Mortgage Index was created in 1996 after five major life insurance company investors - The Equitable, John Hancock, Northwestern Mutual, Principal Financial, and Prudential Insurance Company of America - resolved to build the first robust database to capture commercial real estate whole loan performance data over time. LifeComps started collecting data from participants in 1997, and three more companies, Allstate Life Insurance Company, Connecticut General, and Guardian Life, have since elected to participate.
Tom Jensen, Senior Portfolio Manager at Allstate, and Chairperson of LifeComps, explains, ‘The private commercial mortgage industry needs a performance index based upon actual cash flows. The LifeComps Index provides a long-term benchmark that will allow the commercial mortgage asset class to mature and be better understood by investors in commercial mortgage whole loans, as well the numerous interested parties that inquire as to the credit aspects of holding these investments.’
The LifeComps Commercial Mortgage Index is based on analysis of detailed accounting data on over 5,000 commercial mortgage loans with an aggregate principal balance of more than $61 billion. The data has been collected quarterly from participating life insurance companies since 1996. The Index has a two-fold purpose.
- To provide a quantifiable investment performance index that can be used to compare returns on life insurance company investments in private commercial real estate whole loans with those of other investment asset classes, such as public and private bonds, or equities.
- To serve as a benchmark for privately held commercial real estate mortgages so that owners of these whole loan instruments can compare investment performance with that of a larger life insurance industry commercial mortgage portfolio.
LifeComps is a not for profit venture formed by a number of life insurance companies to collect and analyze comparative commercial real estate whole loan performance data. When the real estate recession of the early 1990’s began to affect delinquency rates in the commercial whole loan mortgage market, institutional investors in those loans had no publicly available historic return data to use to anticipate potential investment losses, or to evaluate their situation against a broader measure of the asset class. In contrast long-term performance data for competing investment asset classes, such as public bond indices, had been published for many years, allowing investors to understand the effects of economic cycles on those returns.
In addition to the published data, LifeComps participants receive detailed quarterly reports that provide total return performance for their portfolio versus the LifeComps benchmark, as well as attribution by property type, region, loan size, and origination year. LifeComps anticipates and encourages other life insurance company participation. For more information go to LifeComps web site at www.lifecomps.com.