The Comet Pension Scheme, a closed defined benefit pension fund, is set to allocate more capital to insurance-linked securities (ILS) as part of a new discretionary alternatives mandate that includes some ILS, adding to an allocation it already had with ILS manager Leadenhall Capital Partners.
The Comet pension scheme first allocated to ILS in 2014, when it added specialist ILS fund manager Leadenhall Capital Partners to manage an insurance-linked investment strategy which could have seen as much as 5% of the pensions assets in ILS at the time.
Now, according to recent documents filed, the Comet pension scheme has added another discretionary alternatives mandate, to be managed by P-Solve Investments Ltd., a division of River & Mercantile Group, with “catastrophe insurance linked securities” allowed to make up from 0% to 50% of the total alternatives mandate and “mortality insurance linked securities” between 10% and 25%.
The discretionary alternatives mandate will target P-Solve with making a Libor +5% return and the allocations can be made within any range of the restrictions above, which suggests that if the market is right as much as 75% of this discretionary alternatives allocation could go to ILS assets.
Leadenhall remains a core manager for the Comet pension scheme, we understand, but the new alternatives mandate managed by P-Solve could enable the pension to broaden its use of ILS as a return driver, by investing in other ILS managers as well.
Increasingly, larger pension funds are looking to multiple ILS managers, in order to diversify their ILS mandates and to try to tap into a broad spread of the best underwriting strategies in the marketplace. Of course some of the mandate could also end up back in Leadenhall’s funds as well, should P-Solve choose to allocate that way.
The trustees of the Comet pension fund clearly have gained an appreciation for ILS. It is quite unusual to see a pension prescribe allocation restrictions on niche asset classes such as ILS, let alone to split catastrophe and mortality insurance linked securities into separate buckets.