Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

DCG Iris shares suspended from trading, winding up decision awaited


The London Stock Exchange listed shares of the DCG Iris London-listed insurance-linked securities (ILS) fund have been suspended from trading as an extraordinary general meeting takes place this morning to decide on the funds winding up.

DCG IRIS, a listed ILS fund marketed and operated by UK investment management firm Dexion Capital with Credit Suisse providing ILS asset and portfolio management services, is expected to be wound-up as the fund managers decided it had not reached a sufficient level of assets to continue operations.

The directors of the fund proposed a liquidation of the funds assets back in June, as they said that the fund had not attracted the investor demand that was predicted before its launch.

The DCG Iris ILS fund was launched in June 2012 when it raised £40.1m in its initial share offering. It subsequently added £11m in December 2012just over £9m in a share offering which closed in May 2013 and just under £1.18m in July 2013. The fund last raised capital in November 2013, when it added another £7.7m. As of the 30th April 2014, the DCG Iris ILS fund stood at £67.89m in assets, which is relatively small for the ILS space.

The directors then proposed terms and detailed the costs associated with winding up the ILS fund earlier this month. According to that timetable, the funds shares would be suspended from trading today and the London Stock Exchange has now confirmed that, saying that this is at the request of the company pending an announcement.

The announcement will be the outcome of the extraordinary meeting which is being held this morning at 11.30am BST. At this meeting the winding up proposal will be made and agreement sought from shareholders. If approved then the winding up will begin today with the appointment of a liquidator.

We understand, from conversations with market participants and some shareholders, that not all investors would like to see the fund wound up. DCG Iris offers investors a way to access the return of the master fund, the Credit Suisse managed CS Iris Low Volatility fund, which is an attractive proposition.

Discussions about the potential winding up that we’ve had revolve around questions as to why DCG Iris failed to attract more capital. It failed at a time when ILS has been at its most popular and inflows have been at a peak. Other listed ILS funds had raised much more capital in the same period, causing some to question whether the marketing of the fund has been as effective as it perhaps could have.

The offering was sound and the underlying strategy leverages the skills of one of the ILS sectors leading investment managers, in the Credit Suisse Asset Management ILS team, perhaps making it harder to understand why it is coming to an abrupt end.

One thing this does show is that size matters in ILS funds. A listed fund like DCG Iris will have much more costs associated with it than a privately managed, institutional only fund and cost-effectiveness of continuing the strategy has to have been a key issue in the decision to propose the winding up.

If the winding up is approved then the shares will be cancelled on the 8th October and redemption proceeds will be received by 30th November, with settlement to shareholders expected as soon after as possible.

We’ll update you once it becomes clear what the fate of DCG Iris is.

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