The total net assets held by U.S. mutual fund manager Pioneer Investments interval style insurance-linked securities fund, the Pioneer ILS Interval Fund, have increased by approximately 14% to now sit at $54.66m.
Pioneer Investments launched its ILS Interval fund in late 2014, which was the managers first dedicated ILS and reinsurance linked investments fund. When Artemis last reported on the fund’s progress the Pioneer ILS Interval Fund had approximately $48m of total net assets as at the 31st January 2015.
Now, at the latest reporting date of the 30th April 2015, the total net assets reported by the ILS Interval Fund has risen by around 14% to $54.66m.
Some of that increase is due to additional capital inflows into Pioneer’s ILS Interval fund, with new investments having been made in the quarter.
Allocations to securities by the fund, which are a mix of catastrophe bonds, reinsurance sidecar notes and other collateralized reinsurance quota share notes, were reported as $46.348m at the 31st January, but had grown to $54.590m at the 30th April.
During the three month period the Pioneer ILS Interval Fund managers added positions in catastrophe bonds including Atlas IX Capital Limited (Series 2015-1), Blue Danube II Ltd. (Series 2013-1), Cranberry Re Ltd. (Series 2015-1), Queen Street X Re Limited (2015) and Sanders Re Ltd. (Series 2014-2),
The fund also added holdings in zero coupon notes from a private ILS transaction named Lahinch Re, a transaction we don’t have any details of. They also added a $2.6m stake in the Lorenz Re sidecar notes from reinsurance firm PartnerRe and a number of share classes from Swiss Re’s Sector Re V collateralized reinsurance sidecar.
The fund’s largest single holding is in a Kane SAC segregated account transaction, a privately transformed reinsurance deal, from a segregated account named Gullane. The other largest holdings include Brit’s Versutus sidecar, Munich Re’s Eden Re II sidecar and PartnerRe’s Lorenz Re.
Being an Interval fund allows Pioneer to invest in less liquid transactions, such as these sidecar notes and private ILS deals as it has some control over redemptions given the regular liquidity intervals offered to investors.
Since its launch at the end of December 2014 up to the 30th April 2015 the Pioneer ILS Interval Fund returned 1.1% at the net asset value, according to the fund’s portfolio managers Charles Melchreit and Chin Liu.
In that period the Pioneer ILS Interval fund far outperformed its benchmark, the Bank of America Merrill Lynch (BofA ML) 3-Month U.S. Treasury Bill Index, which only managed to return 0.01% in the period.
The managers of the fund explained the investment of the fund so far; “We were able to invest 90% of the investment proceeds before the end of the year in order to minimize any cash drag on performance. The primary risk exposures present among the portfolio’s initial investments are to hurricanes in the southeastern and northeastern states and to European winter storms.”
The managers feel the outlook for the fund is positive; “During the Fund’s brief history, we believe we have assembled a portfolio of investments that we believe offer attractive yields and are well diversified by risk and by potential opportunity. The Fund’s investments have specific targets for compensation in an insurance-linked market that features stabilizing prices.”
Pioneer also has allocations to ILS and catastrophe bonds across a number of multi-asset class mutual funds that it operates. The investment manager is said to have around $1.6 billion in ILS assets across the fund’s and strategies that allocate to this asset class.
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