City National Rochdale ILS fund hits $15m, targets broader ILS allocation

In just the first few days of operation of its ILW focused mutual insurance-linked securities (ILS) fund, Royal Bank of Canada subsidiary City National Rochdale, LLC raised over $15 million, its first report suggests. The asset manager is also set to target reinsurance linked investments and ILS for its other mutual fund strategies as well.

The mutual fund manager launched the City National Rochdale Select Strategies Fund (CNRLX), an industry loss warranty (ILW) focused ILS mutual fund, on the 27th July, and by the end of that month already reported its total net assets as $15.43 million.

It’s unclear whether those assets have been invested in the segregated cells of Iris Reinsurance Ltd. the collateralized ILS and reinsurance underwriting entity of specialist ILS investment manager Cartesian Iris with which City National Rochdale has partnered for this fund.

The City National Rochdale Select Strategies Fund is a U.S. 1940’s Act mutual insurance and reinsurance linked securities fund, organised as an interval fund and is the first ILS strategy of the asset manager.

It intends to invest most of its assets in segregated cells of Iris Re, as a way to access a portfolio of industry loss warranty (ILW) risks, as well as certain other ILS assets and even catastrophe bonds. But predominantly the strategy is to build a portfolio of ILW’s for this fund.

In its first report, as of July 31st 2017, the fund manager states the total net assets of the City National Rochdale Select Strategies Fund as now $15.43 million.

Given that was just a few days after the manager launched the fund, it is of course possible that it had made its own seed contribution to kick things off. By now we’d imagine the fund has increased its assets further and it will be interesting to see just how much when it reports its results for the quarter to the end of October.

City National Rochdale is also looking to expand its use of ILS and reinsurance linked investments within its range of mutual funds, having added the ability to allocate capital to ILS within the prospectus of its City National Rochdale Fixed Income Opportunities Fund.

This fund invests across a range of fixed income assets, but now adds catastrophe bonds, ILS and ILW’s to the permitted assets it can allocate its funds to. This fixed income fund had around $2.7 billion of assets under management at the end of September, so it could make a meaningful allocation to ILS relatively quickly, if the manager chooses to.

Interestingly, this fixed income fund had been allocating as much as $17 million to the Stone Ridge Asset Management interval ILS fund at one time. It’s to be assumed that as the managers own reinsurance and ILS strategy grows, this could be swapped out in favour of its own strategies or direct investments in ILS and reinsurance linked assets.

City National Rochdale said that it is targeting up to $500 million of assets for its ILW focused Select Strategies Fund, a figure it believes it is feasible to allocate into the market over the first year of the ILS funds existence.

One additional point of interest. If the asset manager has deployed these initial $15.43 million of assets into the Iris Re ILW strategies immediately, it is highly possible that the fund will already have faced losses due to recent catastrophe events.

We can’t confirm that, as it’s not clear whether any allocation has been made yet, but if it had that would be an unlucky start for the City National Rochdale ILS fund.