Massachusetts pension approves $250m Aeolus & CATCo investments

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The Massachusetts Pension Reserves Investment Management (MassPRIM) Board has approved $250 million of investments in two reinsurance and ILS investment managers, as the $68 billion state pension asset manager looks for diversifying asset classes with low correlation to its wider portfolio.

The MassPRIM Board is responsible for investing the $68 billion Massachusetts pension fund, which includes both the Massachusetts Teachers’ and State Employees’ Retirement Systems as well as the assets of around 100 other participating municipal and county pension systems.

At a board meeting held last week, the attendees voted on making investment allocations to two ILS fund managers, Aeolus Capital Management Ltd. and Markel CATCo Investment Management, as it looks to add reinsurance to its set of investments.

The board heard an update on the state of the reinsurance market prior to voting on whether to allocate to the pair of reinsurance linked investment funds, so key in the Massachusetts pension managers decision is likely to have been the prospect of higher returns being available following the Q3 2017 catastrophe losses.

Both Markel CATCo and Aeolus operate in the retrocession space, as well as reinsurance, hence the pair have faced large losses from the 2017 hurricanes and will be pushing for rate rises at the January renewals, which may have made them an attractive prospect at this time.

The Board of MassPRIM voted in favour of making a $100 million allocation to the Aeolus Property Catastrophe Keystone PF Fund L.P. and a $150 million allocation to the CATCo Diversified Fund II at the meeting, board meeting records show.

The allocation decision provides further evidence that ILS investor appetite has not diminished following the recent catastrophe losses and that sophisticated, large investors like pension funds are likely to continue to discover the asset class and make their first investments in reinsurance and ILS.

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