Pensionskassernes Administration A/S (PKA), the largest administration company for occupational pension funds in Denmark (€16.4 billion under management) is making a strategic move into the insurance-linked securities space with a $150m investment. The firm decided earlier this year to include insurance-linked securities as part of its alternative investment diversification strategy.
PKA were attracted to ILS for the same reason as other pension funds and administrators who have entered the space, the low correlation to other asset classes and the attractive returns are proving quite a draw to pension funds nervous about the financial climate and the capital markets. ILS investment can help them achieve the returns they seek while offering a strategic diversification opportunity.
PKA have selected Twelve Capital to design and manage a $150m mandate investing in insurance-linked securities. “We are delighted to be appointed by PKA” said Urs Ramseier, Managing Partner at Twelve Capital. “We experience significant momentum in investor interest in ILS and we pride ourselves in offering fully flexible solutions to clients with different return and risk objectives. We see this prestigious appointment as a strong endorsement of our capabilities.”
Obviously pleased at the opportunity to enter the ILS space, Line Vestergaard, Head of Absolute Return Strategies at PKA said; “We were impressed with Twelve Capital’s focussed team of insurance specialists and their strong commitment to this strategy. We strive to broaden our investment strategy with appealing absolute return oriented strategies and this portfolio fits very well in this objective.”
It’s always pleasing to hear more evidence of demand from investors for ILS and cat bonds. Pension funds account for significant demand from investors seeking to enter the ILS space at the moment. We regularly hear from managers expressing a desire to enter the space, however the lack of issuance is beginning to become a problem for some. Investment opportunities don’t seem to be as easy to come by as in previous years, particularly for first time entrants to the market. It would be no surprise to see further private catastrophe bond transactions (similar to Clariden Leu’s ‘cat bond lite’) being undertaken specifically to give investors who are new to the ILS market a chance to get involved.