Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

DCG Iris raises £40.1m in share issuance for insurance-linked securities fund


At the end of April we wrote about the upcoming launch of a new insurance-linked securities fund which was being launched by Dexion Capital as a closed-end investment company and would be listed on the London Stock Exchange. DCG Iris Limited has been actively fund-raising since the start of May to attract capital to its initial public offering of shares. Dexion Capital had been thought to be seeking to raise as much as £200m for DCG Iris, however in a release published yesterday they announced that they had raised £40.1 million.

All of the capital raised from this initial listing will be invested in the Credit Suisse Low Volatility Iris Plus fund which invests in a portfolio of insurance-linked securities including catastrophe bonds, derivatives and other insurance-linked investments. The Iris Plus Fund will be a master fund for DCG Iris. This equity wrapped offering from Dexion Capital will provide additional capital from new long-term investment sources to the Credit Suisse master fund. The equity wrapped nature of DCG Iris means that a different class of investor can be marketed to and attracted into the insurance-linked investment space.

It’s a tough time to raise money for any type of equity issuance, even in the ILS and catastrophe bond investment space where interest from investors is high. The global economic outlook right now has made investors shy away from equity issues and DCG Iris is among the very few who have persevered to try to launch at this time. So the fact that they didn’t manage to raise as much capital as they would have liked should not be looked at as a bad thing for the sector, rather this is a case of macro-economic conditions impacting the ILS investment space. A rare thing as not many funds are closed-ended in this way.

Dexion Capital actually extended the fundraising deadline as they a couple of weeks ago to give themselves a little more time to secure as much interest as possible. The fact that Dexion Capital have raised as much capital for DCG Iris as they have should be seen as a success for the sector in our opinion given the extremely difficult financial markets. It shows a continuing demand for ILS and cat bond investments, even in equity form (many other types of equity issuances have been cancelled at this time). It also positions the DCG Iris fund very nicely to issue further shares at a time when the wider equity markets are more in favour with investors.

DCG Iris has applied for admission of its shares to listing on the premium listing segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange and this is expected to take place tomorrow, 27th June. They have raised gross proceeds of £40,148,950 and the shares will be traded under the ticker “IRIS” and the ISIN GG00B7DZCC65.

Talmai Morgan, Chairman of DCG Iris, commented; “We are very pleased to launch the Company at a time of uncertainty for many investors. We have seen a positive response to the investment proposition and the feedback has indicated a confidence in the Company’s strengths. We believe firmly in the ability for the Company to grow through future tap or C-share raises and we plan actively to pursue these opportunities over the coming year.”

Dexion Capital’s Group CEO, Ana Haurie added; “We are extremely pleased to have succeeded in launching the fund. Dexion Capital has undertaken an extensive marketing campaign during which the strengths of the investment proposition have been introduced to a wide range of potential investors. We remain confident in the fund’s potential and future growth through tap or C-share capital raises.”

It will be interesting to watch how this fund evolves over time as DCG Iris offers something many other insurance-linked investments cannot, an equity play. This should make it attractive to a different class of investor and so there could be potential for considerable growth in the future when markets are more settled and the company chooses to issue further shares.

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