This Investment Will Absolutely Kill Youhttp://www.fool.com/retirement/general/2011/05/18/this-investment-will-absolutely-kill-you.aspx Dan Caplinger
May 18, 2011
Wall Street made millions creating ways for investors to bet on the death of the housing market. Now, they want to go even further: They want to bet on your death.
No, big banks Goldman Sachs (NYSE: GS ) , JPMorgan Chase (NYSE: JPM ) , and Deutsche Bank (NYSE: DB ) don't have it in for you personally -- or if they do, it's not because of anything I know about. What they do want to accomplish, though, is to help pension funds deal with one of the biggest risks they face right now: the possibility that retired workers end up living longer than expected, which could lead to gross underestimations of the amount of money that pension funds need to set aside in order to cover their eventual payouts.
Dealing with longevity risk
Ideally, what the group of big banks, which also includes Morgan Stanley (NYSE: MS ) , Credit Suisse (NYSE: CS ) , and UBS (NYSE: UBS ) , want to do is find investors who are willing to take on some of this longevity risk. Right now, insurance companies like Prudential plc have allowed some companies to buy longevity risk insurance. But concerns about regulation as well as capacity issues have led big banks to seek out broader markets.
True long-term investing
In addition, any financial relationship that could last dozens of years raises questions of counterparty risk. Essentially, any pension fund using insurance companies to hedge longevity risk has to hope that it won't go the way of