GAM launches UCITS cat bond fund, brings ILS opportunities to retail investors

by Artemis on November 7, 2011

Investment manager GAM has announced the launch of a UCITS version of their catastrophe bond fund today. GAM Star Cat Bond is a UCITS-compliant fund which aims to deliver stable and attractive returns from a diversified basket of underlying catastrophe bonds and insurance-linked securities. They are seeking to provide attractive returns which are not correlated with the wider capital markets, and now investors only able to access UCITS funds can access this too.

GAM says the fund is the latest addition to a growing range of UCITS opportunities and it allows investors to access securitised insurance risk through a regulated vehicle.

We understand that the minimum investment in this new UCITS fund will be $10,000 (about £6,250) which opens up the opportunity to retail investors. It’s available in a variety of currencies in different share classes for both ordinary and institutional investors. Cat bonds are a sophisticated instrument for retail investors but by investing in the vehicle GAM are allowing the market to tap retail investor capital through a carefully managed fund.

The fund is managed by Fermat Capital Management, one of the largest names in the ILS investment market, and invests in ILS via a portfolio of 40 to 50 cat bonds.

Dr John Seo, Co-Founder and Managing Principal at Fermat Capital Management, said; “In today’s investment environment, where the performance of traditional and even many alternative asset classes are converging, cat bonds have demonstrated their ability to produce attractive and stable returns across turbulent market conditions. The key is to construct and actively manage a portfolio with risks that are well-understood, extensively modelled and adequately compensated.”

Craig Wallis, Global Head of Institutional & Fund Distribution at GAM, commented; “Fermat is one of the most experienced insurance risk managers in the world and they have been managing an offshore strategy for GAM since 2004. The outstanding performance of their strategy, especially during the recent difficult periods for traditional assets, has demonstrated the value of this asset class to a client’s portfolio. The launch of our UCITS offering will improve the accessibility of this attractive and interesting source of return.”

Back in March GAM launched their GAM FCM Cat Bond fund, a non-UCITS fund with a slightly higher minimum subscription but again open to retail investors. From launch to the end of October that fund had risen by over 6% which when compared with the wider financial markets is an amazing return for retail investors to be able to tap into.

If GAM and Fermat can return over 6% during a year when the cat bond market has been affected by losses and uncertainty then a quieter year could see even higher returns. That will be extremely attractive to high net worth investors and the new UCITS fund is likely to be well received.

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