City National Rochdale ILW mutual fund grows as losses settled

Industry loss warranty (ILW) investment focused mutual insurance-linked securities (ILS) fund, the City National Rochdale Select Strategies Fund (CNRLX), has grown in its last reported quarter while at the same time losses from the prior year appear to have been largely settled.

When we last reported on the City National Rochdale Select Strategies Fund ($CNRLX) ILW focused reinsurance and retrocession investment strategy it had relatively static net assets in its portfolio, but the valuation of many of them was distressed.

Earlier this year, the fund assets costs were reported as $44.51 million, as of April 30th 2018, but the valuation of the net assets was only reported to be $30.015 million

Now, the amount of net assets in the portfolio has grown, but more importantly the valuation is noted to be higher than the cost of the reinsurance linked investments, suggesting progress has been made in settling losses caused by the hurricanes and other catastrophe events of 2017.

As of October 31st 2018 the City National Rochdale Select Strategies Fund reported a portfolio of largely ILW investments that cost just over $45.15 million, but which had a value of almost $47.4 million as of the reporting date, suggesting appreciation and positive returns for investors during the quarter.

As of the same date the total net assets of the fund was reported to be $50.54 million, an increase on the prior quarter and the highest level for this fund.

The City National Rochdale mutual ILS fund invests in the segregated accounts of the Iris Reinsurance Ltd. underwriting vehicle, which is owned by Neuberger Berman Group, the asset manager that recently acquired the Cartesian Re ILS operations.

The funds investments accounted for just under 5% of the Iris Reinsurance portfolios as of October 31st, based on Iris Re’s roughly $1.06 billion of reinsurance linked assets in its portfolio at that date. The assets are largely ILW’s but do also include some catastrophe bonds as well.

Given the value of the investments the City National Rochdale fund makes in Iris Re are now largely showing a positive increase on their costs, it seems the managers have been able to realise many of their losses from 2017 events, or recover the valuations of positions that ended up not being affected.

There are still a couple of positions that show a decline in their valuations since purchase, but these aren’t significant. It’s difficult to tell if either of these are due to impacts from 2018 loss events though.

We’d imagine this fund will look to grow in the coming months, now that the impacts from last year’s hurricanes appear largely settled.

It could, in future, provide a valuable source of assets for the Neuberger Berman ILS team, helping to provide them with access to the mutual fund market in an efficient manner, while offering City National Rochdale an alternative strategy for its investor base.