Swiss Re Insurance-Linked Fund Management

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Amundi US targets double-digit returns at lower fees for Pioneer CAT Bond Fund


Amundi Asset Management US, Inc. (Amundi US) aims to develop its newly launched Pioneer CAT Bond Fund into a strategy that can deliver double-digit returns in the current catastrophe bond market environment, while charging its investors a lower level in fees, Artemis has learned.

amundi-us-asset-management-logoWe reported back in December that Amundi US was preparing a launch of a new insurance-linked securities (ILS) mutual fund with a pure catastrophe bond focus.

The Pioneer CAT Bond Fund will follow a strategy as a non-diversified, open-end management investment company, available to investors through financial intermediaries or direct via the asset manager’s Pioneer Funds entity.

Amundi US has a 15-year history of investing in catastrophe bonds, through its multi-asset class strategies and its dedicated ILS funds, such as the Pioneer ILS Interval Fund, an interval fund strategy that allocates capital to a range of reinsurance instruments, including sidecars and quota shares, other private collateralized reinsurance opportunities and catastrophe bonds.

We understand that Amundi US now finds the catastrophe bond market as of a suitable size and make-up to warrant launch of this dedicated cat bond fund strategy.

The investment manager also finds cat bonds more attractive now, for a dedicated strategy, given the much higher returns available thanks to the hardening of reinsurance pricing globally.

“Now is an ideal time for investors to take advantage of this opportunity,” Amundi US explained in materials seen by Artemis.

Cat bond pricing is at multi-decadal highs and Amundi US believes the outlook for the cat bond market to be favourable at this time.

All of which has led to the new strategy launch, which Amundi US says will be differentiated to its existing cat bond portfolios and the investment manager sees the Swiss Re cat bond index as a proxy investors should look to for how its strategy will develop.

The manager said it will apply a comprehensive research process to its cat bond selection for the new Pioneer Cat Bond Fund, with management by the same team that operates its interval ILS fund and broader ILS investments within other strategies.

Amundi US has a robust target in place, with a yield of between 13% and 16% targeted, including the return on collateral.

With cat bond market spreads moving to record levels so far in 2023, the market potential to deliver yields of this nature is now clear.

Amundi US wants to offer investors a lower-cost access point to the asset class with its new cat bond fund, with the strategy set to have a management fee that is around 20% below other available cat bond funds, while operating expenses of the new Pioneer Cat Bond Fund are said around 15% below the competition as well, we understand.

Which is a strong offering to the US investor marketplace, as in mutual fund format cat bond funds remain relatively limited in number, with Stone Ridge’s established strategy the largest available so far.

At the moment, Amundi US is in the very early stages of raising capital for the new fund, with just over $18 million of assets listed on a financial portal.

It will be interesting to see how the asset manager can grow the new cat bond fund strategy over time, with its approach to offering lower fees potentially a draw for some investors.

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