Falcon launches new insurance-linked securities fund

by Artemis on December 8, 2010

Falcon Private Bank has launched a new insurance-linked securities investment fund. It’s the firms second insurance-linked strategies fund, they already manage the Falcon Cat Bond Fund. The new Falcon Insurance Linked Strategy Fund,will invest in catastrophe bonds and is available to private and institutional investors.

The new fund is listed as a UCITS (Undertakings for Collective Investment in Transferable Securities) compliant investment vehicle, meaning that it abides by the set of European Union directives that allow investment schemes to operate freely throughout the EU on the basis of a single authorisation from just one member state.

The press release from Falcon follows below:

New fund allows investors to access returns that are independent of capital markets

Zurich, Switzerland, 8 December 2010 – Falcon Private Bank Ltd. is launching the new Falcon Insurance Linked Strategy Fund. This fund invests in securitized insurance risks, which have a low correlation with traditional investments. Including it in a securities portfolio will allow investors to improve their risk/return profile.

The newly launched Falcon Insurance Linked Strategy Fund from Falcon Private Bank is a compelling asset for private and institutional investors seeking an attractive and uncorrelated source of return. It invests in securitized insurance risks, also known as CAT bonds, and holds a well-diversified portfolio of 25-30 different risk positions.

CAT bonds are issued to spread peak risks more broadly in the capital market. The gain or loss accruing to the portfolio depends on whether or not an insured event occurs. In other words, the source of the return is essentially independent of other asset classes, significantly improving a portfolio’s risk/return profile. There is also no interest rate risk, since coupon payments on CAT bonds consist of the short-term interest rate plus an insurance premium.

The fund management team, headed by Dr. Gregor Gawron, already runs the successful Falcon Cat Bond Fund and has many years of experience in insurance-linked securities and an outstanding network of relationships in the industry.

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