CATCo’s listed retro fund delivers 0.9% and 1.3% NAV returns in January

After a challenging 2017 and 2018 for Markel CATCo investors, the largely retrocessional reinsurance investment fund managers strategies had a chance to demonstrate their return potential in January 2019.

Having suffered significant losses across its retrocessional reinsurance portfolios in the prior two years due to the major catastrophe losses that hit the reinsurance market, 2019 appears to have started off clean for the stock exchange listed retrocessional reinsurance investment fund the CATCo Reinsurance Opportunities Fund.

This listed fund gives a glimpse at the return potential of the 2019 portfolio that Markel CATCo has underwritten, although it should be noted that this fund features more hedging and doesn’t exactly mirror the broader Markel CATCo strategies.

It’s close though and provides an indication of how the pillared strategy could perform in 2019.

After the January renewals, Markel CATCo Investment Management said that a no loss return for its listed fund could be as high as 30% in 2019.

The figures reported for January look reasonably healthy, with the Ordinary share class net asset value (NAV) rising by almost 0.9% in the month and the C shares seeing their NAV rising by an impressive near 1.3% over the period.

It’s testament to the potential returns that can be made through investments in retrocessional reinsurance linked strategies and also reflects the better rates that Markel CATCo achieved at the January 2019 renewals.

The Ordinary and C share classes saw 0.3% and 1.05% NAV increases in January 2018.

Of course, this listed Markel CATCo fund looks set to be run-off now, as the company seeks to enable investor redemptions from the legacy portfolios.

But whether that results in the end for this fund strategy completely remains to be seen and perhaps January’s returns will encourage investors that they should not be too hasty in shifting away from reinsurance as an investment strategy.

Markel CATCo also said last week that it was going to waive some management fees from the side pocketed investments held by this listed fund.

Finally, parent and owner Markel Corporation recently said that it would adapt the Markel CATCo underwriting and investment strategy based on what it can learn from the catastrophe losses that affected it so severely during 2017 and 2018.

If Markel CATCo can come out of its loss affected years with an optimised strategy that works better for both ceding clients and investors, there is every chance that it could remain a mainstay fixture of the retrocession market.

January’s returns will likely be welcomed by the owning firm and the investors across the Markel CATCo strategies.