Oppenheimer cat bond fund AuM up, as 2017 losses still being realised

The catastrophe bond and related insurance-linked security (ILS) assets under management in the fund portfolios of investment manager OFI Global, a company of Oppenheimer, have risen slightly in the last year, but the impact and ramifications of 2017’s major catastrophe losses are still being realised.

A year ago, the OFI Global Cat Bond Strategy has now increased in size to $361.8 million, as of the end of April 2017. That strategy had been almost $400 million in size back in 2013, but had shrunk back only to begin growing again through the end of 2016 and into 2017.

The OFI Global Cat Bond Strategy grew again to $376 million as of April 30th 2018, which is only a very slight increase in overall catastrophe bond assets under management, but the losses of 2017 have reduced the AuM, so growth has actually been higher.

This can be seen better in the Oppenheimer Master Event-Linked Bond Fund, LLC, a subset of overall Global Cat Bond Strategy portfolio, which had $276 million of assets as of the end of March 2017.

As of March 31st 2018 the total net assets of this Oppenheimer cat bond fund had increased to just shy of $300 million, but again the growth in assets would have been much higher were it not for the losses that cat bond positions have taken thanks to the 2017 hurricanes and the general aggregation of catastrophe reinsurance and retrocession losses from last year and into 2018.

In fact, the Oppenheimer ILS investment team report that the value of the portfolio of its Oppenheimer Master Event-Linked Bond Fund, LLC, is now down more than 8% on the price the investors paid for each position.

The cost of all of the cat bonds within the Oppenheimer fund was $317.13 million, but their value as of March 31st 2018 was reported to be $291.42 million, so down 8%.

But were it not for the losses it does seem that the growth of assets under management within the Oppenheimer Master Event-Linked Bond Fund would have been around 15%, based on the growth from $276 million of assets last March and prior to the loss events.

The portfolio shows significant mark-downs for some cat bond positions, including a number of USAA’s Residential Re bonds, which as we wrote last week are increasingly viewed as set to take losses, as well as some of Heritage’s Citrus Re bonds, one of Avatar’s Casablanca Re cat bond tranches, as well as other names including big mark-downs on specific tranches issued by Safepoint’s Manattee Re and Argo’s Loma Re. Details on all these cat bonds and others facing losses can be found in our Directory here.

These mark-downs are unrealised losses currently, as losses continue to develop and have yet to be finalised, so in many cases these will just be reflecting the managers view of the current value of these cat bond positions, based on broker marks and its own insights.

So Oppenheimer continues to grow its catastrophe bond fund strategy despite the impacts of last year’s losses, which are continuing to be realised by the manager.

It’s taking time for the eventual losses to be fully understood, but by marking down positions at least investors in the fund will be prepared for the worst when sponsors finally announce what reinsurance recoveries they will be making from outstanding catastrophe bonds.

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