ILS a growth area at Schroders, higher Secquaero stake shows intent

Global asset management group Schroders has underlined its commitment and ambitions in its insurance-linked securities (ILS) investment business, with the CEO of the group explaining that he sees it as a growth opportunity for the firm.

Further underlining Schroders commitment to the insurance and reinsurance linked investments market,  it transpires that the company increased its stake in Zurich based Secquaero Advisors, the advisory and consulting firm specialising in intermediation of insurance or reinsurance risk to the capital markets and insurance-linked investments.

Speaking during the Schroders half-year results call yesterday, Group Chief Executive Peter Harrison explained that insurance-linked investments, which Schroders categorises alongside other private asset alternatives such as infrastucture finance, are seen as a key growth opportunity.

Harrison explained; “Private assets for me is a theme that isn’t going to be disrupted by passives, where you still see really good longevity.”

Harrison revealed during the results speech that Schroders has increased its stake in Secquaero, which is a clear sign of the importance that the relationship with Secquaero has as well as the asset managers commitment to ILS going forwards.

Schroders stake in its partner in the ILS business Secquaero was increased from the 30% originally announced in April 2013, up to a 50.1% majority stake as of the 1st February 2016, we understand.

Discussing the growth seen in insurance and reinsurance linked investment management at Schroders, Harrison said; “I’ve seen insurance-linked securities, where we increased our stake in Secquaero to over 50%, that business having gone from £200m is now well in excess of £1 billion.”

In fact, Schroders ILS assets under management actually sit just under the $2 billion mark, having hit $1.9 billion at the beginning of the year and with some small inflows through the first-half. The asset manager is carefully looking at opportunities in the market and as they emerge more capital inflows are likely.

Insurance-linked assets now make up 2% of the total £73.4 billion portfolio of fixed income investments managed at Schroders, which further breaks down as 1% of the £48.4 billion institutional sourced fixed income portfolio and 2% of the £25 billion intermediary sourced fixed income assets under management.

Schroders ambitions in the ILS space were also underlined in February by its launch of the Schroder Advanced ILS Fund (Cayman) Ltd., which enables the firm to target inflows from investors in the U.S. and Canada. Prior to that the majority of its ILS assets under management had been sourced from the UK and Europe.

Alongside its pure catastrophe bond funds, which largely sit on the investment managers UCITS platform, and its higher return funds that can also invest in private ILS, the addition of a fund targeting the U.S. shows that Schroders is ready to upsize on its ILS assets under management as and when opportunities allow.

By lifting its stake in Secquaero and strengthening that partnership, Schroders also demonstrates that ILS is set to be a core asset class within its overall investment offering.