Ex-Goldman Sachs structured products head Michael Millette has lined up one of the world’s leading asset management groups as an anchor investor in the funds to be launched by his new venture Hudson Structured Capital Management.
Hudson Structured Capital Management, which will operate a fund offering insurance and reinsurance linked investments, as well as another fund offering transportation finance investments, has been in the market with a private offering for its two funds lately, according to sources.
The roadshow has seen Hudson Structured meeting with potential investors as it lines up capital for the two funds in order to launch some time around the start of April, we understand.
Sources familiar with the company confirmed recent reports that the anchor investor lined up for both of the Hudson Structured funds is to be Blackstone, an asset manager with $336 billion under management at the end of 2015. The injection of capital is expected to be up to $250 million, split between the Hudson Structured insurance-linked strategies fund and transportation finance fund.
The anchor investment from Blackstone will take Millette’s new firm roughly halfway to a rumored target of $500 million of launch capital, with the roadshow and subsequent private placement of the funds expected to generate the rest from investors seeking access to returns from re/insurance or transportation assets.
On the company’s new website which launched recently, Hudson Structured Capital Management describes itself as “an asset manager focused on alternative investments targeting mezzanine level returns. Our focus is on the Re/Insurance and Transportation sectors.”
Millette, along with his other founding partner at Hudson Structured David Andrews who focuses on the transportation assets side, has lined up a stellar team to operate the insurance and reinsurance linked fund strategy.
Edouard von Herberstein has been hired as a Partner at Hudson Structured and Chief Underwriting Officer of Hudson Bermuda, the firms Bermuda based fund management platform. von Heberstein was previously Deputy Active Underwriter at Ariel Re Syndicate 1910 at Lloyd’s of London, before which he was with the Goldman Sachs Reinsurance Group Syndicate (Securities Division) when it acquired Ariel Re.
Well know ILS industry executive Tim Tetlow joins as a Partner at Hudson Structured and Chief Operating Officer of Hudson Bermuda. Tetlow was most recently one of the founding members of ILS Capital Management Ltd., as well as being a member of its Investment Committee and having responsibility for its Bermuda operations. Tetlow also led ILS Capital’s portfolio strategy group, sourcing and underwriting the majority of the ILS fund manager’s transactions for its 1609 Fund and its marine and energy relationship with Berkshire Hathaway.
Vikas Singhal has joined as a Managing Director at Hudson Structured, working on the re/insurance fund strategy. Singhal was previously a Partner at Gracie Point, a company focused on specialty lending in the life insurance industry in which he remains an Advisor. Before that Singhal worked at Concord Capital Management focused on structured finance strategies in insurance.
Rachel Bardon joins as Managing Director primarily focused on the re/insurance strategies. Bardon was previously at Montpelier Re holding the role of Vice President and Head of MRe Actuarial & Head of MRH Capital Modeling. Prior to that Bardon worked at Liberty Mutual for 5 years.
Finally, in the re/insurance fund team, Michael Rotter, most recently at Goldman Sachs in the Financial Institutions Group, has joined Hudson Structured as Head of Legacy Business. During his time with Goldman he worked in the Reinsurance Group for 8 years where he was originated and negotiated 12 life reinsurance transactions totaling more than $12 billion in assets.
Hudson Structured also has two very well-known advisors on the reinsurance side, David Cash, ex-Chief Executive Officer at Endurance Specialty Holdings Ltd. and Ming Lee, ex-CEO of Verisk Climate and President and CEO of AIR Worldwide.
A team of professionals has also been hired for the transportation finance fund, as well as for the operations of Hudson Structured.
The diverse talents of the team of staff and advisors that Millette has built within the Hudson reinsurance fund department reflects the diverse nature of the business that Hudson Structured will underwrite and invest in.
Hudson Structured’s reinsurance fund strategy will see it invest in “reinsurance and insurance-linked assets across all lines of business and all instruments to optimize relative value, as well as mezzanine-level “working layer” risk,” according to the firms website.
It will opportunistically invest in different categories and lines of business, as the mos attractive investments become available. Classes of re/insurance business covered range from natural catastrophe risks; to other property lines including per risk, specialty lines, crop & weather risks; life and health related lines; casualty lines including run-off and also cyber; and financial lines of business such as hedge fund reinsurers, D&O, surety, bond and others.
This diverse strategy will see the Hudson Structured insurance and reinsurance strategy fund with the most diverse portfolio in the ILS fund marketplace, we believe. No other ILS fund manager has adopted such a broad strategy of tapping so many lines of insurance business in order to deliver returns to its investors.
The key will be in the structuring of these opportunities, with many of these risks longer tailed and so less frequently seen by insurance-linked investors. By structuring these more unusual lines of business in the right way, however, the tail exposure can be minimised and they can become attractive drivers of insurance-linked returns.
Millette has always suggested that ILS can be a much broader asset class than it is today and that other classes of insurance or reinsurance business are suitable to be transferred to capital markets investors. He has also been a proponent of structuring risks in order to make them investable.
Sources told Artemis that with the help of the anchor investment from Blackstone, as well as capital raised from other sources, Hudson Structured looks set to launch with at least two-thirds of the $500 million of capital target it had been targeting. How close to the target the firm gets by April will depend on the success of the recent roadshow, we understand.
The capital will be put to work as opportunities allow, we’re told, which with both April and the mid-year June/July renewals could see the re/insurance fund fully invested by the second half of this year, we’d imagine.
Millette’s new venture Hudson Structured is going to be extremely interesting to watch, as it brings a new style of ILS fund diversification to the market. The broad diversification across multiple classes of business will be something unique in the market at this time and also perhaps suggests where the ILS asset class will go in future as it increases in maturity and expands its reach more deeply into insurance and reinsurance markets.