Cartesian to grow investor base with Lux & mutual funds, listed shares

by Artemis on June 23, 2017

Cartesian Re, the reinsurance and ILW focused investment management unit sponsored by global private equity investment firm Cartesian Capital Group, LLC, is expanding its access to investors using a multi-pronged approach including a new Luxembourg domiciled fund, a U.S. mutual fund and a Bermuda listed vehicle.

Cartesian Re largely underwrites industry loss warranties (ILW’s), derivatives or collateralized reinsurance contracts based on industry or parametric loss triggers and is in the process of setting up a platform for future growth.

In the recent past, Cartesian Re had accumulated around $550 million of third-party investor capital, which it largely put to work through ILW’s underwritten by its Iris Reinsurance Ltd. vehicle.

Now, the ILS manager is aiming to bring capital into its strategies through multiple markets and routes, setting up new strategies which will provide it with this multi-pronged approach to raising investor capital.

As we’ve written previously, Cartesian Re is set to benefit from the launch of a new interval-style U.S. mutual fund focused on reinsurance and ILS investments, the City National Rochdale Select Strategies Fund which is being launched by a subsidiary of the Royal Bank of Canada and expects to invest a significant proportion of its assets in Cartesian’s Iris Re vehicle.

That provides Cartesian Re with a way to access the U.S. mutual fund investor-base, which has shown a keen liking for the returns of reinsurance and ILS as evidenced by the success of Stone Ridge Capital Management.

Rochdale is targeting up to $500 million of capital for the mutual fund in its first two years of operation.

But Cartesian is also looking to European investment markets for new capital as well, having established and being in the early stages of marketing a Luxembourg domiciled SICAV investment fund strategy.

The Alternative Investment Fund Managers Directive (AIFMD) compliant fund is domiciled in Luxembourg and named the Cartesian Re ILS SICAV SIF, and will open Cartesian Re to more investors in Europe, such as family office, private banks and institutions.

Cartesian Re of course already has ways these investors could access their strategies, but not every investor wants to or can access offshore investment vehicles, making mutual funds and an AIFMD solution a good option for ILS managers looking to tap into a much larger investor base.

Cartesian isn’t stopping there though. The ILS manager has also begun to market the listed shares that it issued and registered with the Bermuda Stock Exchange (BSX) last year.

The shares were listed to support a new capital raise, but now Artemis has learned that the strategy dubbed Iris Re ILS is in the early stages of being marketed to investors, offering a more transparent way to access the Cartesian reinsurance linked investment returns through an exchange listed vehicle.

With these listed Iris Re ILS shares, which relate to a segregated account of Iris Reinsurance Ltd., Cartesian Re will invest in the same underlying strategies that the Rochdale mutual fund and the Luxembourg funds are accessing, providing another vehicle for investors to access the returns and Cartesian to benefit from investor flows.

In this way, Cartesian is putting in place the ground-work and structures necessary in order to support a new phase of asset growth, bringing investor capital from new markets into its reinsurance linked strategies and enabling new demographics of investors to access its returns.

By establishing these multiple routes to investor capital Cartesian Re should be able to increase its ILS and reinsurance assets under management considerably.

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