The Board of stock exchange listed retrocessional reinsurance investment fund the CATCo Reinsurance Opportunities Fund said today that it has agreed to a waiver of one-third of the management fees related to side-pocketed investments that it would normally pay to Markel CATCo Investment Management.
The Board of the fund company said it has consented to a waiver of 33.3334% (one-third) of the management fees that it pays indirectly to Markel CATCo in respect of the current side pocket investments.
Side pockets make up a considerable proportion of the assets of this retrocessional reinsurance focused investment fund, following the heavy catastrophe losses suffered by Markel CATCo’s strategies over the last two years.
By waiving some of the management fee on those investments, the manager will reduce the level of possible investor returns taken up by management fees for the duration of those side pocketed investments for at least a year.
The reduction due to the waiver will be effective from January 1st 2019 until December 31st 2019, but that is also subject to potential extension by Markel CATCo and its master fund, the Markel CATCo Diversified Fund, the Board explained.
Management fees are payable to Markel CATCo Investment Management, as the manager of the master fund, which is the vehicle where the listed CATCo Reinsurance Opportunities Fund holds its investments.
The exposure to side pocket investments comes about through the listed fund’s holding of certain classes of share in the master fund, specifically side pocket shares.
With the listed CATCo fund set to enter into run-off in the near future, as we explained recently here, any reduction in the management fees related to side pocketed investments will likely be looked on favourably by core investors in the fund.
James Keyes, Chairman of the fund Company, said, “The fee reduction is welcome news for the Company, given the significant proportion of the Company’s NAV represented by side pocket investments.”
It’s not known whether investors in other Markel CATCo strategies will benefit from a similar reduction in management fees at this time.
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