The Alaska Retirement Management Board (ARMB), which oversees the pension fund assets of Alaska’s state retirement systems, is looking to make a $75 million allocation to insurance-linked securities (ILS), with Schroders the likely beneficiary.
The ARMB, which at the 30th November 2015 counted over $28.3 billion of retirement assets under its oversight in a number of state pension funds, received an educational presentation from Schroders in October and board documents from the AMRB show that the focus was on investing in insurance and reinsurance linked securities (ILS).
Schroder Investment Management (Schroders) managed ILS and reinsurance assets totalling more than $1.7 billion (at 1st September 2015) in a variety of ILS fund strategies and mandates.
The AMRB said that it expects that an allocation to ILS could provide it with “returns that have a low correlation to other assets such as fixed income, equities, hedge funds, and commodities,” according to the board documents.
AMRB notes that Schroders is currently developing an ILS investment vehicle which will be able to accommodate U.S. investors. Schroders existing ILS fund strategies are largely targeted at European investors, or those able to access UCITS strategies.
Following the meeting with Schroders the AMRB approved its staff to work with investment advisor Callan Associates to perform due diligence on Schroders’ ILS investment capabilities and products. The due diligence is said to be ongoing.
If the review and due diligence proves positive, AMRB staff have been authorised to enter into contract negotiations with Schroders with a view to investing up to $75 million in one of its ILS strategies, according to the documents.
Pensions & Investments reported that, if it goes ahead, the investment allocation to ILS would be made with cash on hand at the Alaskan pension fund manager.
As managers of large pension fund become educated and familiar with investing in ILS, or other assets directly linked to reinsurance market returns, the allocations keep coming. The benefits of diversification, low correlation and relatively stable long-term returns remain attractive to major pension funds the world over and this trend continues to drive ILS market growth.