K2 Advisors

K2 Advisors, Inc. was formed in July 1994. K2 began investing with initial capital of US$6 million in October 1994 and reached US$1 billion in assets under management at the beginning of 2003. Firm assets under management are currently approximately US$11.2 billion (as of May 1, 2018).

On November 1, 2012, Franklin Resources, Inc., which operates as Franklin Templeton Investments, acquired, through one of its wholly owned subsidiaries, Franklin Templeton Institutional, LLC (FTI, LLC), a majority interest in K2’s holding company, K2 Advisors Holdings, LLC. The new ownership structure is designed to allow management to retain a stake and benefit from the post-acquisition growth of the business. It is anticipated that Franklin Resources, Inc. will acquire the remainder of K2 over a multi-year period. K2 continues to operate as an investment group within the Franklin Templeton Alternatives platform. K2’s investment process remained unchanged as a result of this transaction.

Team size and structure:

As of June 15, 2018, K2 has 120 full-time employees, 44 of whom are investment professionals. Insurance-Linked Securities Research is led by a team of investment professionals who have significant experience in the space going back to the genesis of the ILS capital market. Raphael Blunschi and Jonathan Malawer have co-led the ILS team since joining K2 in 2008 and 2007, respectively. Each has covered ILS for over a decade, dating back prior to the point of significant growth in the market. They are supported by junior analysts and the Franklin Templeton’s Risk, Trading, and Operational/Legal teams.

Offers private managed accounts?

Yes (custom portfolios)

Strategy:

Since its first ILS fund investment in 2003, K2’s research and allocation methodology has continuously evolved. The firm regularly screens an ILS fund universe consisting of over 70 managers globally.

Over time, this universe has experienced an institutionalization process, which K2 believes has given an edge to some managers in various sub-segments of the ILS market.

Through K2’s extensive research work, we have identified what we believe to be the best-in-class managers in each of these ILS sub-segments.

However, since ILS funds only cover a smaller segment of the property catastrophe reinsurance market, K2 also engages with traditional reinsurers through quota-shares offered across various business lines and risk profiles.

This allows K2 to allocate capital across the full range of property catastrophe managers and underwriters, providing access to the majority of the risk market.

K2 also seeks to allocate risk where the market offers the most attractive pricing. Given the firm’s broad access points to the industry, K2 can offer a variety of solutions with different risk/return targets, ranging from the most liquid ILS exposure in catastrophe bonds to the less liquid ILS private transaction solutions.

Number of strategies:

14 (This figure represents the number of ILS affiliated and unaffiliated hedge fund managers on K2’s approved list as of June 15, 2018).