Disaster bond managers produced “one other marquee yr of returns” in 2024 and as soon as once more skilled a robust 12 months of inflows, based on evaluation by Kepler Absolute Hedge, a analysis and data-led supplier of perception into hedge fund methods.
All in all, throughout the broader various UCITS investments fund area, property beneath administration (AUM) declined by 7.5%, or $17.3 billion to $230.2 billion in 2024, however whereas it was one other yr of contraction total, the disaster bond market carried out effectively.
In keeping with Kepler, “the ILS sector as soon as once more had a robust yr for flows, aided by excessive spreads available in the market and finally sturdy efficiency.”
In truth, in the case of the highest 5 constructive AUM adjustments throughout the AH Credit score Index, two cat bond managers make the checklist for 2024.
In fourth place sits the Schroder GAIA Cat Bond fund, which noticed its AUM enhance by $658 million to $3.489 billion for the yr.
The fifth spot for 2024 goes to the Leadenhall UCITS ILS Cat Bond Fund, which achieved AUM progress of $486 million to $1.094 billion.
Throughout the broader AH Credit score Index, the general AUM change was a constructive $3.4 billion for the yr, supported by the expansion on the two cat bond managers.
2024 was additionally one other yr of strong returns for cat bond managers, Kepler highlights.
“Cat Bond managers delivered one other marquee yr of returns (c. mid-teens). The sector capitalized on the upward stress on reinsurance premiums following a sequence of industry-wide loss occasions in prior years and has seen since elevated charges, whilst new capital has flowed into the area,” explains the agency.
The evaluation exhibits that the GAM Investments GAM Star Bond fund was a high performer in 2024 at a return of 14.5%, albeit one proportion level down on 2023’s even stronger 15.5%.
“The AH Credit score Index delivered its greatest yr since we incepted the index again in 2010, including 6.8% in 2024. The technique was extremely constant all year long with just one small down month (-0.2%) and 95% of managers constructive. Greater-for-longer yields and more and more tighter spreads created the perfect backdrop for directional fixed-income investing,” says Kepler.
Trying forward on the efficiency of the broader UCITS area, Kepler notes, “In recent times, the Different UCITS sector has confronted a number of challenges, together with blended efficiency relative to conventional asset courses (significantly equities), a troublesome circulation setting for lively funds, and rising risk-free charges presenting alternate options. In opposition to this backdrop, the sector noticed one other yr of contraction (-7%), nonetheless, regardless of the destructive headlines indicators are rising that the sector is stabilizing amid a shift in investor sentiment.
“With international equities dealing with subdued return expectations as a result of excessive valuations and focus, and bonds shedding their diversifying enchantment in a ‘greater for longer’ setting, we consider liquid alt methods can play an essential position into traders portfolio. The chance set for hedge fund methods stays as strong because it has been in recent times, with ample alternatives for alpha era pushed by regional divergences, geopolitical dangers, and different elements. Moreover, elevated money charges—comparable to quick rebates and the power to earn cash market charges on unencumbered money—are anticipated to offer a beneficial tailwind for the asset class.”
Analyse UCITS catastrophe bond fund assets under management using our charts here.
You can too analyse UCITS cat bond fund performance, using the Plenum CAT Bond UCITS Fund Indices.
