DCG Iris, a London-listed insurance-linked securities (ILS) fund, marketed and run by Dexion Capital with Credit Suisse’s ILS team providing ILS asset management services, is soon to exist no more as the company is set to be wound up.
The Directors of DCG Iris proposed the winding up of the ILS fund back in June, involving the liquidation of its investments and return of capital to its shareholders. The Directors said that the fund has not attracted the investor demand that was predicted before its launch.
Because the fund had not attracted this expected demand it has not grown particularly large, reaching around £68m at the mid-year. Due to the funds small size and the now more challenging, softer reinsurance market, which makes maintaining its returns a more difficult task without taking on a riskier strategy, the Directors proposed the funds winding up.
DCG Iris has submitted a redemption request to Credit Suisse Asset Management to recoup capital back from the master CS IRIS Low Volatility Plus Fund. The next available dealing date for redemption is on October 1st and it expects to receive redemption proceeds from the master fund by November 30th.
The cost of winding up the ILS fund is estimated at £740,000, or 1.07p per share, with the bulk of this, £613,595, payable to Credit Suisse for services and costs incurred during the set up and launch of DCG Iris. This cost was agreed at the launch of the fund if it did not remain invested in the master fund until June 2019.
A liquidator has been appointed and the fund will now go through the winding up process with shares being suspended from trading on the 24th September and the settlement with shareholders happening as soon as practicable.
It remains surprising that DCG Iris didn’t have more success raising capital over its existence, particularly in its first year when almost every other ILS fund grew rapidly. The returns were attractive in its first year and the master fund operated by Credit Suisse has been very successful. Other listed funds have also had more success at raising capital while having similar mandates.
Targeting investors through a listed fund would, you might imagine, open up a whole raft of investors who perhaps don’t know the ILS sector or have not had access to it before. This would mean that marketing is key to attract capital and it has to be said that this may have been where the DCG Iris initiative was lacking.
DCG Iris would have targeted a more retail class of investor, given its listed nature it was accessible through many investment avenues and advisers. Looking at the example set by Stone Ridge Asset Management in the U.S., this retail element should not be a barrier to asset growth which does leave one wondering what went wrong and why DCG Iris couldn’t grow.