Banque Heritage, Coriolis Capital & Pictet team up on cat bond fund

Swiss private banking group Banque Heritage, which manages over CHF 5.7 billion for its private and institutional client base, is launching a catastrophe bond fund strategy in partnership with UK-based ILS specialist investment manager Coriolis Capital and the Pictet private bank group.

According to a report from Citywire, the new cat bond fund will be formally launched in September of this year. The cat bond fund, which its said will be called the HERITAM Equinox fund, will be a UCITS strategy and part of Banque Heritage’s SICAV range of funds.

Banque Heritage’s HERITAM series of funds are all Luxembourg domiciled UCITS IV SICAV structures. The Equinox cat bond fund will be Heritage’s first foray into insurance and reinsurance linked investments.

Banque Heritage is set to seed the new cat bond fund with some initial capital to get it up and running and will act as the distributor, marketing the fund to its existing client base as well as to potential new investors.

Meanwhile specialist insurance and reinsurance linked securities (ILS) investment manager Coriolis Capital Limited, one of the longest-running ILS managers in the business, will manage the cat bond fund, making investment decisions for new positions to be taken.

With a target of Libor plus 4% to 6%, the HERITAM Equinox cat bond fund will be open to investors from Switzerland, the UK and France, according to Citywire’s report.

The news that Banque Heritage is set to launch a cat bond fund comes soon after the news that another Swiss private banking group Lombard Odier had hired a team of ILS specialists to do the same. They join LGT Capital Partners and Falcon Private Bank, which are both operating or distributing catastrophe bond and ILS funds out of Switzerland.

As the world’s financial markets once again come under macro-economic pressure, investors seek out asset classes which have a degree of decorrelation from the main market indices. This could result in another boost for the ILS asset class and the recent private bank ILS launches demonstrate that these groups feel their client-base will be attracted to cat bond or insurance-linked returns.

The partnership between the two firms makes perfect sense. Banque Heritage benefits from gaining an experienced ILS investment team, without the requirement to hire one, enabling the private bank to broaden its client offering to include cat bonds and ILS.

For ILS manager Coriolis Capital, working with Banque Heritage will enable the manager to benefit from the distribution reach of the private bank, while bringing more third-party capital under Coriolis management.

These sub advisory type relationships provide a good way for financial groups which have client access and distribution reach to expand into a specialist and complex asset class, without the need to bring a team in-house. It’s likely that we’ll see more such relationships in the future.

Update:

The launch of this new catastrophe bond fund is actually a three-way partnership, as Pictet, another Geneva-based private bank, asset and wealth manager, is to act as the administrator, risk manager and valuation agent for the HERITAM Equinox cat bond fund.

Pictet counts CHF 420 billion of assets under management or custody, as at the end of June 2015, with a spread of clients across 80 countries around the world.

The additional involvement of Pictet, alongside Banque Heritage and Coriolis Capital, will add extra distribution reach as well, given the Pictet private banking groups reach and client base.

This new cat bond fund venture should have an impressive reach into the private wealth and institutional investor base across the countries targeted.