Investment manager Baillie Gifford, who are headquartered in Edinburgh, Scotland, are one of the many asset managers who have allocated capital to the reinsurance-linked investment space. Demonstrating that reinsurance and catastrophe risk is currently an attractive addition to their broad portfolios, Baillie Gifford have taken 10% of the shares from the initial offering made last week by Bermuda reinsurer Montpelier Re’s newly launched Blue Capital Global Reinsurance Fund.
According to a London Stock Exchange notification, Baillie Gifford have taken a major interest in the Blue Capital Global Reinsurance Fund, amounting to 10,010,000 shares, which is 10% of the total initial offering. With Montpelier Re themselves having put $50m into the initial offering of $100.1m, Baillie Gifford has put in $10.01m for their 10% participation which also gives them 10% of the share earned voting rights.
Baillie Gifford clearly see the benefits of an allocation to the reinsurance-linked investment space via insurance-linked securities, catastrophe bonds and other reinsurance and retrocessional contracts. They put $8m into the launch of the CATCo Reinsurance Opportunities Fund, which made up 1.1% of the assets contained in their Mid Wynd International Investment Trust PLC investment fund. It’s interesting that the Blue Capital offering is to operate a very similar structure as the CATCo operations, so Baillie Gifford clearly like the multi-pillared approach to risk diversification that both funds offer. They also appreciate cat bonds and 1.1% of their Mid Wynd fund is allocated to the Everglades Re transaction, they may also have other allocations to the sector in their other funds. We’re not sure where the 10% allocation to Blue Capital is to be placed within the various Baillie Gifford investment offerings.
Investing with managers like Baillie Gifford is one of the ways that your average retail investor can gain exposure to reinsurance and catastrophe risks within their personal portfolio of investments. The Mid Wynd trust, which has assets across many classes including equities, is available to access via pensions and other personal investment offerings in the UK.
As the ILS and reinsurance-linked asset class grows we expect many investment managers will begin to look to allocate small portions of their funds to reinsurance to take advantage of the twin benefits of non-correlation and attractive returns.