Pioneer adds 28% to ILS Interval fund assets, nears $390m

The Pioneer ILS Interval Fund, a U.S. mutual fund insurance-linked securities and reinsurance linked investment strategy operated by asset manager Pioneer Investment Management, has increased its assets under management bu almost 28% in the last reported quarter, reaching $390 million by the end of July 2017.

This interval style ILS and reinsurance mutual fund has experienced steady growth since its launch by Pioneer Investment Management. The mutual fund manager was recently acquired by investment giant Amundi, giving the overall group somewhere north of EUR 1.3 trillion of assets under management.

The AuM of the Pioneer ILS Interval fund, which is the managers first ILS and reinsurance only investment strategy, reached $245 million as of January 31st 2017, growing by another 25% to reach $305 million by April 1st of this year.

Pioneer continued to find investor interest in the strategy over the next three months, with the total net assets of its ILS Interval fund reaching close to $390 million by July 31st 2017, a 28% jump in assets managed within the strategy.

During the quarter, Pioneer took advantage of the record pace of catastrophe bond issuance to add new positions to the portfolio, which meant that the cat bond share of the portfolio rose to roughly 18%.

As a result, the share of the ILS Interval fund portfolio that is invested in so-called structured reinsurance investments, which are the collateralized reinsurance sidecars and private ILS deals, dropped to just under 80%, having stood at almost 87% of the fund at the end of April.

Pioneer’s largest single positions in the ILS Interval fund remain in reinsurance sidecars, with a $33.5 million investment in a 2017-3 issuance from TransRe’s Pangae sidecar vehicle the largest single investment, followed by $28.5 million in PartnerRe’s Lorenz Re Ltd. and almost $21 million in Brit’s Versutus 2017.

Following that, two Artex SAC segregated account issues under the Gleneagles and Gullane segregated accounts make up another $40 million of the funds assets between them.

Other investments of note include $23 million into Munich Re’s Eden Re II sidecar issuances, almost $6 million in Swiss Re’s Sector Re V sidecar, and numerous other segregated account deals which will be private ILS deals or quota share transactions, we assume.

The current reporting period is too early to reflect any of the recent major catastrophe losses, hurricanes Harvey, Irma, Maria and the Mexico earthquakes, but as we wrote yesterday it’s likely the Interval ILS fund will see some losses due to exposure across all of these events.

All of the sidecar positions invested in by the fund are almost guaranteed to see some losses, as reinsurers pass on a share to quota share vehicles that provide them with retrocession.

Additionally many of the private ILS transactions will be quota shares for reinsurers as well, so some of the segregated account deals will also suffer some losses from the catastrophe events.

It looks as if the Pioneer ILS Interval fund also has a holding in the stricken FONDEN catastrophe bond, one tranche of which suffered a total loss due to the first Mexico earthquake.

The fund doesn’t hold the Manatee Re 2016-1 cat bond from Safepoint, which is facing a loss as well, but it does hold many of the aggregate retro cat bonds from XL and Everest Re, some of which are deemed at risk of potential losses due to the aggregation of losses across some of the recent events.

The Pioneer ILS Interval fund had been up by 4.1% in 2017 until the impacts of the mark-to-market loss expectation from recent catastrophes caused it to drop. Now, year-to-date return is reported as -2.24%, a figure which could drop further once the tru extent of losses from recent hurricanes filters through.

However, as an ILS fund, this is what the Pioneer ILS Interval fund and its investors are here for, to pay claims when major disaster strike. Investors will be compensated for taking on these risks and any loss suffered from recent events could be recouped over the following year through some higher pricing, if catastrophe losses revert to closer to the norm.