City National Rochdale’s largely industry loss warranty (ILW) focused mutual insurance-linked securities (ILS) investment fund increased its total net assets under management to $147.8 million by the end of October 2020, an increase of 13% in the quarter.
The City National Rochdale Select Strategies (CNRLX) fund is an interval style mutual fund with a focus on investments in industry loss warranty (ILW) reinsurance and retrocession contracts across global peak peril zones, as well as some regional U.S. ILW contracts. In addition, the fund also holds some investments in catastrophe bonds.
The fund accesses the returns of the ILW market and sources its risk-linked investments through a relationship with asset manager Neuberger Berman’s experienced ILW and index reinsurance investment team.
To achieve that, the assets of this mutual fund are deployed to segregated cells of the Neuberger Berman ILS team’s NB Re Ltd. underwriting and transformer vehicle (which was previously named Iris Re).
The City National Rochdale Select Strategies ILW focused investment fund had reported its total net assets as reaching almost $123.2 million at January 31st 2020.
By July 31st 2020 this had increased to just over $131 million, as we previously reported here and the investment managers were citing a significant opportunity for growth in the firming reinsurance market environment.
By October 31st 2020, the next reported quarter, the fund’s ILS assets under management had increased and it reported that its total net assets had risen by around 13% to reach just over $147.8 million.
Total investments by the mutual fund, into the segregated cells of the NB Re reinsurance vehicle and as a result ILW contracts and some catastrophe bonds, were valued at $107.4 million at January 31st, then $119.25 million at July 31st 2020, but rose further by 18% to reach $140.83 million at October 31st this year.
The cost of those almost $140.83 million of invested reinsurance linked assets is listed as $120.75 million, with appreciation shown for many of the segregated cell investments which have likely run loss free through 2020 so far.
With reinsurance and in particular retrocession pricing rising for the January 2021 renewals, we should expect this fund to expand further at its next reporting juncture.
The opportunity for returns in ILW’s and index based reinsurance products will rise along with pricing, making it an attractive strategy for investors looking for diversified and alternative returns, within a mutual fund structure.