The DCG Iris Limited insurance-linked security (ILS) and reinsurance-linked investment fund said today that it will hold a continuation vote and offer its shareholders a chance to redeem their share capital before conducting another placement of new shares. The continuation vote and redemption offer are required as DCG Iris has not hit its £150m fund-raising target yet.
The articles of incorporation and prospectus when the DCG Iris ILS fund was launched stated that the fund-raising target was to reach £150m in commitments by the 30th June 2013. To date DCG Iris has raised just over £61m, through its initial offering and three further share issuances, some way short of its original target.
DCG Iris will seek to gain approval from shareholders at an extraordinary general meeting to approve the continuation vote, allowing the company to continue operating and raising new funds. It will also provide full details of the redemption offer at that time and any redemptions would be paid out in early 2014.
The DCG Iris team, consisting of investment advisor Dexion Capital and investment manager Credit Suisse, said today that they believe the ILS fund; “Offers a unique and attractive proposition for investing in insurance-linked strategies.”
To date the DCG Iris ILS fund has achieved an annualised NAV total return to the 12th July 2013 of 5.02% along with a dividend of 4.75 pence per Sterling Share. It has conducted three share issuances since its launch which between them have raised £21.5m, with the latest completed earlier this week taking them to over £61m of assets under management.
Dexion Capital and the investment manager Credit Suisse said that they are aware that investors want to see the DCG Iris fund grow and propose to launch another share offering as soon as the continuation vote is passed. They expect the share offering to be completed around the 25th September, after the extraordinary general meeting which will be held on or around the 30th August.
It is a little surprising that the DCG Iris ILS fund has not raised more capital so far. It offers a low-volatility ILS and catastrophe reinsurance-linked investment opportunity and is managed by one of the sectors top asset management teams in Credit Suisse. The low-volatility nature of the investments, with DCG Iris’ share capital solely invested in the Credit Suisse managed CS Iris Low Volatility Plus fund, should be extremely attractive to many types of investor, not least multi-asset class funds that invest in alternatives. DCG Iris is also one of the few exchange listed funds available and being UK domiciled should also attract pension funds which cannot invest abroad due to their mandates.
The actual size of the DCG Iris fund does not make a huge difference to its investors as it invests in, and so tracks the return of, the CS Iris Low Volatility Plus fund. It seems likely that a continuation vote would be passed, we see no reason for it not to pass. Some investors may choose to exercise their right to redeem shares, that is always a possibility, but it’s likely that another share offering in September will help to grow the fund further.
It seems the initial target set by DCG Iris has perhaps been a little too stretching for a new fund, which is marketed under a brand that is not well-known in ILS yet. The strategy employed by DCG Iris is sound and it offers a very good opportunity to access the return of reinsurance and catastrophe risk for many types of investors so we would be surprised if it did not continue.