Pioneer ILS Interval Fund anticipates largest capacity window of year

The Pioneer ILS Interval Fund, a dedicated insurance-linked securities (ILS) focused mutual investment fund strategy managed by Amundi Pioneer Investment Management, is anticipating its largest subscription window of the year from a capacity perspective.

The Pioneer ILS Interval Fund has shrunk slightly through 2020 so far, having reported $831.64 million of ILS assets at October 31st 2019, which then shrank to $816.6 million by the end of January 2020 and further to just over $797 million at the end of April 2020.

Having reported its latest quarterly portfolio in recent weeks, the Pioneer mutual ILS fund sat at at just under $793 million of total net assets at July 31st 2020, which was largely invested across insurance-linked securities (ILS), quota share reinsurance arrangements or sidecars and catastrophe bonds.

At the same time as remaining relatively static, in terms of overall ILS and reinsurance assets managed in the Amundi Pioneer mutual ILS fund, the manager has increased its holdings of catastrophe bonds in recent months, it seems.

This is similar to the Stone Ridge managed mutual ILS funds, which also remained relatively flat in terms of AuM as redemptions slowed, but allocated some more capital to recent cat bond issues, as we reported recently.

At July 31st 2020, Amundi Pioneer’s interval ILS fund now has 61.4% of its investments in collateralised reinsurance sidecars (up from 60.3% at the end of April), catastrophe bonds at 17.5% (up from 14.5%), collateralized reinsurance at 20.7% (down from 21.3%) and industry loss warranties (ILW’s) at 0.8% (roughly flat).

There appears to be a trend for managers of dedicated ILS funds that are diversified across structures, to allocate a little more through the summer months to catastrophe bonds.

This will have been a response to the better yields available in recent cat bond deals, as well as the fact they are named peril and so considered more tightly worded, in general, while also offering liquidity to allow managers to move in and out of them more simply.

It seems the Amundi Pioneer ILS fund may have allocated more of its cash to cat bonds in recent months, while slightly downsizing its collateralised reinsurance allocation.

The fact the fund is relatively flat in the last quarter of record bodes well for a return to growth, as the manager will be looking to capitalise on market conditions and rising yields in cat bonds and other ILS investments.

In fact, Amundi Pioneer is currently open for subscriptions to a window that it describes as likely the “largest window for the year” from a capacity perspective.

This window is in preparation for the end of year renewals, where reinsurance rates are expected to continue hardening.

As a result the opportunity to enter a diversified ILS fund like Amundi Pioneer’s is perhaps more attractive at this point in time than for a number of years, so it will be interesting to see how much additional capacity can be added.

As ever, managers’ like Amundi Pioneer will only add capacity to right-size the opportunity to get it deployed effectively into ILS and reinsurance deals that meet its risk appetite and return requirements.

As a result, we should expect significant growth, rather a slight upsizing to build on the ILS portfolio it has already created with attractive opportunities sourced from the cat bond pipeline and at the reinsurance renewals is the most likely outcome, we’d imagine.