Arkansas Teacher pension fund tops up its Aeolus ILS allocation

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The Arkansas Teacher Retirement System, a state pension fund that provides retirement solutions to Arkansas education professionals, has approved another $30 million allocation to ILS and reinsurance focused investment manager Aeolus Capital Management at the end of 2019.

Aeolus Capital Management logoThe Board of Trustees approved the fresh allocation to Aeolus’ Property Catastrophe Keystone PF Fund in order to ensure they can capitalise on improved market conditions in reinsurance and to replenish collateral that has been trapped by catastrophe events and so wouldn’t have been available in time for the key January reinsurance renewal season.

The Arkansas Teacher Retirement System has been invested in the strategy run by Aeolus Capital Management since it made a $110 million commitment back in 2015.

In April 2016 the pension fund added another $37 million to the allocation, to be deployed at the June 2016 renewal season.

This was followed by another $110 million invested for 2018, $50 million of which was allocated for the January renewal and $60 million to cover held back collateral, as the pension looked to maintain its allocation weights to Aeolus’ strategy.

A further $70 million was approved for allocation to Aeolus’ ILS strategy later in 2018, which was for deployment at the January and June 2019 reinsurance renewal seasons.

As 2020 approached, the Arkansas Teacher’s pension fund’s staff and consultant Aon Hewitt advised the trustees that a further $30 million allocation would be wise for the January renewal season and other future renewals.

This was considered advisable for two reasons.

Firstly, to ensure the Arkansas Teacher’s pension fund could benefit fully from improved pricing opportunities at reinsurance and retrocession renewals.

Secondly, as the higher levels of claims seen in recent seasons means that collateral is held back while losses and reserves develop, sometimes meaning some additional liquidity is required to maintain investment allocations.

The pension explained that, “The higher than usual level of claims creates a need to reserve additional funds that would normally be released to investors in time for investment in the upcoming January tranche.

“The additional allocation of $30 million dollars is intended to deal with the timing issue between reserves for potential claims, and the timing required to fund other upcoming underwriting seasons.”

The Board of Trustees unanimously adopted the motion to commit up to another $30 million to the Aeolus managed ILS fund strategy at a meeting on the fourth-quarter of 2019.

As of the end of December 2019, the Arkansas Teacher Retirement System counted more than $286 million of assets invested in Aeolus’ Property Catastrophe Keystone Fund.

The pension investor also has another almost $44.4 million invested in the Nephila Capital managed Rubik ILS strategy as well.

In recent year’s both ILS strategies have been beset by catastrophe losses, but by steadily increasing its allocations to Aeolus and ensuring there is capital available for the all-important renewal seasons, the Arkansas Teacher’s pension has clearly demonstrated its appetite to persist with its allocations to the ILS asset class and reinsurance sector.

The Arkansas Teacher Retirement System is just one of the numerous pension fund and major ILS investors we track in our directories here.

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