One of the insurance-linked security funds that launched during 2012 was Dexion Capital managed DCG Iris Ltd. The ILS fund, which launched back in June and had its shares listed on the London stock Exchange (LSE), acts as a feeder fund and invests all of its capital assets in Credit Suisse’s CS IRIS Low Volatility Plus Fund. CS IRIS invests in a broadly diversified portfolio of insurance-linked contracts, securities and catastrophe bonds as well as various types of investments related to insurance risks.
At launch, DCG Iris had been targeting £200m of capital but only succeeded in raising £40.1m, which was unfortunately a sign of the difficulties that many types of equity offerings have had when fund-raising, even in the ILS and catastrophe bond investment space where interest from investors continues to be strong.
So, DCG Iris have announced that they are going to continue fund-raising with a series of share offerings, the first of which is expected to be completed before the end of the year. Sensibly, DCG Iris aren’t setting themselves any target for the first share offering, rather they are aiming to increase their assets under management to £150m through an unspecified number of offerings by 30th June 2013.
DCG Iris has a target return of LIBOR +5% to 7%, with an annual volatility of 2% to 4%. Although DCG Iris themselves do not have a track record managing ILS funds or reinsurance-linked investment strategies, the fact that they are simply a feeder for the Credit Suisse ILS fund which has a long track record and $4.2 billion of assets under management in their ILS investment area should stand in their favour.
By taking the fund-raising more slowly, in a series of share issues, DCG Iris stand more chance of hitting their target of £150m by next June. Of course the area DCG Iris need to really focus on is marketing themselves and educating prospective investors in the ILS and catastrophe bond asset class, which is always a challenge for an ILS investment opportunity which targets private investors.
We’ll update you when we hear the results of DCG Iris’ first share offering later this year.