Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Catastrophe bond investment funds contribute to GAM asset growth


Independent asset management group GAM Holdings announced its first-half results today, reporting net new money inflows of approx $1.43 billion and 5% growth in assets over the period, with its catastrophe bond fund strategies contributing strongly.

The half-yearly results statement discusses the inflows and growth of assets and highlights catastrophe bonds as a key asset class for GAM; “A strong contribution came from specialist fixed income strategies, in particular the GAM-branded credit opportunities and cat bond strategies.”

GAM operates two catastrophe bond investment funds, the offshore GAM FCM Cat Bond Fund, which has been offered since December 2004 and the more recently launched UCITS compatible GAM Star Cat Bond Fund. Both of the funds feature specialist catastrophe bond and insurance-linked securities (ILS) investment manager Fermat Capital Management as their investment manager.

The GAM cat bond funds have seen strong growth as investors discover ILS investing through its broad marketing network. As a result the fund had been soft-closed in 2012 in order to control access due to strong investor demand and to ensure that capacity constraints in the cat bond market did not result in any difficulty allocating capital.

In the first-half of this year the GAM funds have continued to see strong investor demand and with catastrophe bond issuance also stronger the funds have been able to grow, while at the same time ensuring that every dollar raised could be put to work.

At the end of 2013 the GAM cat bond strategy had assets under management of $1.34 billion, with $690m in the offshore GAM FCM Cat Bond Fund and $650m in the GAM Star Cat Bond UCITS strategy fund. Since then the funds have both grown further, largely thanks to net new money inflows coming into the strategy.

By the end of 30th June 2014 the GAM cat bond strategy had assets under management of $1.7 billion. Growth was strongest for the UCITS fund and the GAM Star Cat Bond Fund reached an AuM of $934m by the middle of the year. The offshore GAM FCM Cat Bond fund made up the rest, growing to approximately $766m in AuM.

As a more mainstream asset manager with many different asset class strategies within its remit and a much broader marketing network, the relationship with GAM helps to bring additional assets to Fermat Capital managed cat bond strategies, from sources the firm would be unlikely to reach on its own.

This partnership approach, of a mainstream multi-asset manager branding and marketing an ILS fund, while a specialist ILS or cat bond manager provides the investment advice and management is becoming more popular and we would expect to see these strategies continue to grow, as the cat bond and ILS market allows.

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