Swiss Re Insurance-Linked Fund Management

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Ambassador Fund deploys first capital to re/insurer bonds & possible sidecar

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The Ambassador Fund, a US mutual investment fund that was launched to have a core focus on catastrophe bonds, has begun to deploy some initial capital it has raised, but with the deployment being to corporate bonds of insurance and reinsurance companies, as well as one allocation to the preferred notes of what may be a private reinsurance sidecar.

payments-money-cash-ils-reinsuranceWe were first to report last September on the launch of the Ambassador Fund, which counts its investment advisor as Embassy Asset Management LP and sits as a series under the Investment Managers Series Trust II, which is sponsored by the fund arm of UMB Bank, UMB Fund Services, Inc., alongside Mutual Fund Administration, LLC.

Its launch continued the trend of bringing ILS investment opportunities to a wider range of investors in the United States, being registered as a non-diversified mutual fund structure under the Investment Company Act of 1940.

At launch, the Ambassador Fund was positioned to have a primary focus on investing in catastrophe bonds, but with the ability to also invest in other insurance-linked assets, such as collateralized reinsurance, quota shares, excess-of-loss deals and industry loss warranties (ILW’s).

We were also first to report in December that Tangency Capital Ltd., an insurance-linked securities (ILS) investment manager that originally had a focus solely on quota share reinsurance business, was set to take on the portfolio manager role for the Ambassador Fund.

Then, in May this year, we reported first that the investment strategy had been broadened in the prospectus for the Ambassador Fund, with what began as a cat bond strategy seemingly expanding in scope to include a remit to invest in a range of other insurance and reinsurance-linked assets.

The Ambassador Fund had raised some capital earlier this year, around the $28 million mark.

In the last quarter of record, to July 31st 2022, the portfolio managers of the Ambassador Fund, which will be the Tangency Capital team, have deployed some of that capital to a range of assets.

Our of a now reported $27.13 million of net assets, some 44.7% has been deployed into the corporate bonds of insurance and reinsurance firms, with names including Berkshire Hathaway, AIG, Chubb, Everest Re, Progressive, Travelers, RenRe and Marsh McLennan.

After that, 44.6% of the assets are invested into US treasury bills and other short-term assets.

But the final roughly 10.4% of invested assets, or roughly $2.82 million at NAV, has been invested into what looks like either a private reinsurance sidecar arrangement, or collateralized reinsurance structure, named Consulate Re 2022-1A.

Which means the Ambassador Fund has begun to invest in what we’d term insurance-linked securities (ILS), although only 10% of the current asset base of the fund.

The broadening of the scope of investable asset types the Ambassador Fund is allowed to allocate to has clearly helped, enabling the portfolio managers to start building out something that will deliver insurance and reinsurance market linked returns, albeit not with a typical mutual ILS fund mix of assets.

So it will be interesting to watch the Ambassador Fund develop and whether it builds up its ILS holdings and starts to allocate to catastrophe bonds as well, or whether it remains a more mixed strategy with a clear insurance and reinsurance market focus.

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