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Schroders is pleased to announce the launch of Schroder IF1 Flexible Cat Bond, a new ‘cat bond plus’ fund. The fund primarily focuses on natural catastrophe risk and gains exposure through investments in cat bonds. To achieve broader diversification, it has the flexibility to invest up to 25% in private placement cat bonds (cat bond lites)2. The fund can also take tactical short positions (hedges) to mitigate extreme event risks. |
Cat bonds have a very low correlation to other asset classes including equities, commodities and corporate bonds, providing great diversification within a multi-asset portfolio. Cat bonds also offer protection against interest rate rises, which is particularly interesting in the current low yield environment, due to their very low interest rate sensitivity.
The Flexible Cat Bond fund can invest globally, however its portfolio will be biased towards regions such as the US, Western Europe and Japan, which have high levels of wealth accumulation and insurance penetration.
The fund is managed by Daniel Ineichen, who currently manages $1.6 billion3 of insurance-linked securities strategies worldwide. In managing its insurance-linked securities (ILS) strategies, Schroders works together with Secquaero Advisors, a reinsurance specialist boutique that acts as exclusive investment advisor to Schroders. The total ILS team consists of 21 professionals – one of the largest ILS investment teams in the industry.
Schroder IF Flexible Cat Bond targets returns of cash (3 month USD Libor) + 6% per annum over an insurance cycle.
Tim van Duren, Investment Director Insurance-Linked Securities, said:
"We are very pleased with the launch of this new fund to complement our range of ILS strategies. Cat bond strategies provide our clients with great diversification in a portfolio context. We are very excited about the cat bond lite market, which we expect to grow significantly in the coming years."
1 Schroder Investment Fund is referred to as Schroder IF.
2 Private placement cat bonds can enable investors to access a wider range of catastrophe risks from smaller issuers. 3 Schroders as at 31 December 2014 |
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