Amundi Pioneer ILS Interval Fund allocates more to ILW’s & sidecars

In the last quarter of record, the dedicated insurance-linked securities (ILS) mutual investment fund operated by Amundi US Investment Management allocated more of its capital into industry loss warranty (ILW) and reinsurance sidecar investments.

The Pioneer ILS Interval Fund continued to grow in the last quarter of record to July 31st 2021, adding 1% to its total net assets, to end the quarter at $1.01 billion in size.

As we explained a quarter ago, the Amundi Pioneer managed ILS investment fund had surpassed its previous high set in mid-2018 this year, reaching the billion dollar mark when rounded up for the first time in its history at April 30th 2021.

The mutual fund strategy, which invests across catastrophe bonds, reinsurance sidecars, private collateralized reinsurance deals and quota shares, as a 1940’s Act mutual fund structured in the interval style, had shrunk to as low as $793 million in net assets as of July 31st 2020, after catastrophe losses from consecutive years impacted it.

One year later, at July 31st 2021, the Pioneer ILS Interval Fund now stands over 27% larger, at $1.01 billion of net assets, as the recovery continues.

As its losses have increasingly begun to crystalise and get settled, Amundi has now grown this ILS fund strategy for four consecutive quarters.

Now, it appears Amundi is looking to capitalise on market growth, firming reinsurance rates and its strong relationships, particularly in the quota share reinsurance deals it allocates to.

Over the quarter to July 31st 2021, the portfolio managers of the Pioneer ILS Interval Fund adjusted its mix towards industry loss warranties (ILW’s) and also reinsurance sidecars, or quota share structures.

At the same time, the portfolio managers have slightly shrunk its catastrophe bond portfolio, dialling this back from 23% of total net assets at April 30th, to 21.5% at July 31st.

Over that quarter, investments into private collateralized reinsurance deals also shrank from 17% to 14% of the portfolio.

At the same time, ILW’s rose from 2.4% to 3.2%, and also growing, the reinsurance sidecars component expanded from 56.6% to 57.7% of net assets.

The time of year likely has something to do with this, with the mid-year reinsurance renewals having been a good time to deploy quota share capacity selectively to long-term partners.

It’s expected this trend will also be a feature of the January 2022 reinsurance renewals, when quota share capacity is expected to be in demand, while capacity could still be a little lower than it had been in previous years.

For the Amundi Pioneer ILS fund strategy that could present an opportunity to raise more capital to deploy towards the end of this year.

The Pioneer ILS Interval Fund has its largest investment window coming up towards the end of this year, allowing the managers to bring in new capital to match the opportunities it sees in the renewal marketplace this year.

The managers will be hoping for attractive opportunities to continue growing the ILS fund’s net assets and likely deploying more into the quota share segment, where conditions may prove to be particularly attractive again.

Hurricane Ida is a bit of an uncertainty, of course, and we’d expect the storm to dent the fund’s performance and pricing of some positions when its next quarterly portfolio disclosure is made.

But that should only serve to underscore the importance of the reinsurance capacity that ILS fund’s, like Amundi Pioneer manages, are providing to their key quota share partners, which should ensure that terms and rates for Jan 1st 2022 renewals allow for further portfolio enhancements to be made.