Entropics Asset Management AB, the first insurance-linked securities (ILS) and catastrophe bond fund manager to be established in Scandinavia, has officially opened its SEF Entropics Cat Bond Fund today, with over £8m of investment from Movestic, part of the Chesnara Group.
Entropics fund is the first investment fund to specialise in catastrophe bond investments to come out of Scandinavia and the ninth globally to comply with UCITS regulations, the firm said.
Robert Lindblom, CEO of Entropics, stated on the opening of the fund; “I’m happy that we are now able to offer Swedish institutional and private investors access to a new, diversifying investment class. As a complement to existing traditional investment portfolios, we expect that the fund will dampen the volatility and contribute with good risk adjusted returns.”
Movestic is a Swedish life assurance company specialising in savings, personal and occupational pension products. With the investment in the SEF Entropics Cat Bond Fund Movestic will seek to provide their policy holders with a new source of risk adjusted returns which have a low-correlation with wider economic factors and financial markets through its asset allocation funds.
“Movestic is at the forefront of developing new solutions in the pensions market, which they again prove by using Cat Bonds as a new source of uncorrelated returns. It is evidence of the suitability of our Fund as part of an asset allocation product,” Lindblom commented.
The SEF Entropics Cat Bond Fund is available to institutional investors in all EU countries and is now open for subscription. The fund, the first launch by Entropics Asset Management AB which launched in 2014, will invest in a globally diversified portfolio of cat bonds, with a target return of 4-6 percent after fees.
On the timing of the opening and how the fund will begin to allocate its capital, Lindblom said; ““The timing is beneficial from our point of view. We see a steady flow of new emissions coming in the spring, where we aim to participate. This expected emissions will also drive activity in the secondary market, opening opportunities for us to assemble an attractive portfolio.”
Given market demand and the amount of investor interest that is currently being shown in ILS and catastrophe bonds, Lindblom said Entropics will take its time to ensure the right investments are selected.
“We are, of course, eager to start allocating in cat bonds and will start to do so shortly. However, we are very determined to maintain investment discipline and will await the right moments to invest,” he said.
Movestic, as one of the largest and most highly regarded providers of pension solutions in Sweden will be a high-profile first investor for the fund. Movestic is currently the most selected provider of advised occupational pension plans within the Swedish fund insurance segment
Lindblom commented; “We are very happy to start the Fund with Movestic as our first investor. The timing is right and their use of the Fund as part of larger allocation funds is in line with one of our projected uses of the Fund, to decrease volatility in traditional portfolios.”
Entropics received its license from Finansinspektionen, the Swedish Financial Supervisory Authority, in July 2014 and had planned the launch of its first UCITS compliant cat bond fund in time for an expected pick-up in issuance around the first-quarter of 2015. The fund was then approved by the Luxembourg financial supervisory authority, the CSSF in December, and passported into the Swedish Market allowing it to be officially opened for business.
As well as being open to EU institutional investors, the fund also offers a retail class, currently only in Sweden, but can be passported to suit distribution agreements the Entropics may arrange in the future.
Now that Entropics has its catastrophe bond fund open to external investors and subscriptions the fund manager will have the job of managing subscriptions alongside opportunities to invest in the cat bond market. With issuance expected to pick up in the months approaching the mid-year reinsurance renewals the timing may be ideal.
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