Atmos Capital Partners launches as partner-led, independent cat bond investment manager

Atmos Capital Partners AG has launched as a new partner-led, independent investment manager based in Zurich, with a specialist focus on building and managing catastrophe bond portfolios for investors and a technology-first, entrepreneurial approach.

Atmos Capital Partners is majority-owned by its founding partners, and is also backed by a group of business angels from across the insurance, banking, asset management and financial services space, the company told us today.

With operations now underway, the immediate plan is to work towards launch of the firm’s first catastrophe bond fund.

This is planned to be a UCITS catastrophe bond fund registered in Ireland, which the investment manager expects to be running around the end of this year.

That initial Atmos Capital Partners cat bond fund strategy will have a very clear mandate to be focused on natural catastrophe exposure in the liquid insurance-linked securities space, so investing only in Rule 144A catastrophe bonds at the start.

The majority of the founding team of Atmos Capital Partners have previously worked at ILS specialist manager Twelve Securis, with four of the team having held senior positions at that dedicated insurance-linked securities investment manager.

Etienne Schwartz is a Founding Partner and the Chief Investment Officer of Atmos Capital Partners. He departed from Twelve Securis this year after a thirteen year senior career at the ILS manager, most recently as a Partner and the Chief Investment Officer for liquid strategies at the firm.

Matt Fischer is a Founding Partner and the Chief Executive Officer of Atmos Capital Partners and also departed Twelve Securis this year, having spent twelve years in senior roles most recently as a Partner and Chief Strategy Officer.

Martin Sennrich is a Founding Partner and General Counsel at Atmos Capital Partners. He was formerly the Head of Legal at Twelve Securis, where he spent over three and a half years working.

Bruno Müller is the Chief Risk Officer at Atmos Capital Partners. Another former Twelve Securis employee, he spent more than eleven years at the ILS manager most recently as Partner and CRO.

Finally, Marie von Bomhard is also in the launch team of Atmos Capital Partners as Business Manager. She has experience across private investment markets and public policy, gained across commercial real estate and venture capital, while having held strategic roles at the Austrian Federal Chancellery and the Munich Security Conference.

Speaking with two of the founding partners of Atmos Capital Partners today, we learned that the team will be built out over time as the business grows, including on the analytical and quantitative side.

Co-founders Etienne Schwartz, CIO and Matt Fischer, CEO sat down with us to discuss the thesis behind the launch of Atmos Capital Partners and the strategy for expansion and growth.

First we asked the Partners why they see this as an opportune time to launch a new ILS investment manager, to which Schwartz explained, “The first important fact is that technology has changed. In previous years, you needed to be very large in order to afford cutting-edge analytics. That has changed and now more nimble, smaller, specialised teams can do a lot of heavy-lifting and even be more agile in the current environment.

“Secondly, the UCITS cat bond funds are significant in terms of size now, and the capital market is continuing to grow in reinsurance. We think that allows for more competition in that space, and one of our key selling points is our focus on this liquid nat cat space, whereas I feel like a lot of the market is trying to cover all of it. Our point here is, we really want to do what we understand best, which is nat cat liquid exposure.”

Fischer highlighted the expertise in the Atmos Capital Partners founding team, saying, “On the team side, with many of us having been in the industry for ten to fifteen years, we wanted to take the next step and become entrepreneurs ourselves, putting our conviction in liquid cat bonds at the heart of the firm’s vision. We want to give the investor side, the genuine and appropriate returns they’re looking for in this very specific asset class.

“We are big believers in a lean team with highly qualified technology support behind it, and in finding the right partnerships in the market to build out the business, with the ambition of becoming one of the leading ILS managers in the industry over time.

“We do not mind looking into further strategies as we build out the business, but the core vision of the business is liquid ILS potentially combined with other asset classes, built by a team which has a lean setup, supported by the appropriate partners and and outsourced technology.

“But yes, we are ambitious. We want to be the go-to name for cat bonds. Having known each other for thirteen years, there is also true friendship behind this whole venture. This goes further than just building out a team and a new firm. It is truly based on us knowing each other and believing in the same thing, which is a core value of the firm and something we can stand for.”

In terms of differentiation, Schwartz further highlighted that technology and how Atmos Capital Partners utilises it will be a key point of difference.

This goes further than just adopting the recognised big technology suppliers to the cat bond and ILS market. While the company has already licensed one of the major vendor catastrophe models, it will also draw on newly built analytics and tools from a dedicated technology partner for an additional edge.

That partner is Nilo Analytics, a separate, arm’s-length analytics and technology company, for which Atmos Capital Partners will be the first client. Over time, Nilo Analytics could also provide technology services and software more broadly within insurance-linked securities and reinsurance.

“One of the key points is that, from an investor perspective, a lot of cat bond funds look from the outside-in very much the same, because just accruing the coupon over-time means that they naturally, if nothing happens, have very similar return profiles. But there will be a time where the cat bond market has some significant losses, and investors should also be prepared for that, and I think we will do a good job there to position our fund accordingly,” Schwartz said.

Adding, “We will work closely with Nilo Analytics, whose first focus will be supporting Atmos and the fund with technology to do proper research and understand the underlying Nat cat risk.

He further said, “We need these services anyway and the cat bond market can also evolve in terms of data quality, and not everyone needs to do everything themselves; managers can still apply their own edge on top.”

Schwartz further explained on differentiation for Atmos, “It will come from this analytics point of view and from our focus on investment management, meaning that we are building a company centred around investment management. We want to deliver performance. We are here to stay, and this long-term perspective reflects our long-term commitment to performance.”

Fischer highlighted that the firm is not deterred by launching into a softer reinsurance and ILS pricing environment.

He explained, “Obviously the liquid piece of the strategy in that sense is key to it, because we see that investor sentiment around the softening of the market could also change.

Two, three years ago, we were looking at much better return levels. But we feel that, with our analytical capability, launching in a softening market really demonstrates the disciplined approach we’ll be taking to risk selection.

“Secondly, if you look at the investor side of things, alternatives have faced challenges on the private side, in private credit markets and elsewhere. But in liquid alternatives, the sentiment towards asset classes that offer genuine diversification is something we feel makes catastrophe bonds stand out.”

Schwartz added, “One important point is capacity management. One of the key elements in the future will be that managers will perform better if they are disciplined in terms of capacity management. A lot of managers are saying the same thing, but we really want to live that and put it into the performance of the fund ultimately.”

We asked the pair for their views on market conditions in cat bonds and ILS at this time.

Schwartz told us, “Within the ILS market, spread levels might not look that attractive. But, if we look outside of the ILS market, the value proposition is still very much there. Non-correlated returns with still very decent to good return potential.

“The value proposition, even at these levels, is still holding true and what investors want is something that diversifies away their portfolios from financial market volatility, and there is plenty of that around.

“If you compare with high yield and other asset classes, I still strongly believe there is an attractive value proposition for ILS. In my view, maybe the allocations of institutional investors might drift down slightly to a neutral level, but there is always a place for ILS in institutional portfolios, and that will remain the case.”

Fischer added, “If you look at the spreads, as Etienne said, they’re still higher than high yield, and if you take duration into account on top, that also matters particularly on the institutional side. The asset class has become quite mature over the last few years, probably also due to the UCITS funds growing, which means there is new client segments, market segments and geographies opening up all the time.

“In that sense, there is a lot more potential on the client side, whereas ten or fifteen years ago, only very knowledgeable institutional clients would have bought ILS exposure. So I think that partly counteracts the tightening of spreads, and reflects the genuine diversification characteristics of the asset class, particularly Nat cat bonds as we see them.”

Fischer summed up how Atmos Capital Partners feels launching into the market at this time, “Our excitement is huge and obviously the team pedigree goes a long way as well. I think we can immediately show that we can look after the whole value chain, which really shapes the investment offering we have. We’re looking forward to engaging with everyone in the industry and beyond, to make this a more widely known and valued asset class across the investor world.”

Schwartz further commented, “We have received so much support from everyone so far, so that’s also a positive and welcome message. That if you take some risk and want to build something, there is friendly and helpful support out there in this industry.”

Read all of our interviews with ILS market and reinsurance sector professionals here.