Interesting news has emerged today via an article in Hedge Fund Alert which reports that Deutsche Bank is in the process of setting up its own insurance-linked securities (ILS) fund. We heard some market whispers to this effect a couple of months ago ourselves in discussions with people close to the bank, so with this news today we feel more confident that a launch is coming.
According to the article, Deutsche Bank is in the early stages of setting up a hedge fund which will invest in insurance and reinsurance linked assets including catastrophe bonds. In typical ILS fund style it aims to attract third-party investors to invest in the fund and will deploy those assets into instruments such as catastrophe bonds and insurance or reinsurance contracts.
The article suggests that Deutsche Bank plans to seed the fund with $100m of its own capital to get the strategy started. This is a sensible approach as even an investment bank of the size and stature of Deutsche Bank will need to be able to show some kind of traction and track record if it is to attract meaningful amounts of third-party capital from prospective investors.
Deutsche Banks ILS fund will be operated out of London by a team in the firms Asset & Wealth Management unit, according to the article. Michael Amori is slated to head up the ILS fund efforts, according to the article, he previously headed up a longevity risk transfer group where he led teams involved in a number of billion dollar longevity swap transactions, however we understand Michael is based out of the U.S. currently. We can’t confirm this ourselves but we have heard that it will be a European based operation.
That’s all that has been reported so far. We reached out to Deutsche Bank to try to confirm this but a representative within the banks asset management arm refused to comment.
While this is speculative we are now sure that underneath this rumours is a fact that Deutsche Bank is planning some type of ILS fund vehicle launch. Whether that sits within the bank itself, as an offshoot managed by a third-party (the regulatory environment may make this an attractive option) or some other arrangement is as yet unknown.
We will of course update you if/when we hear anymore on this.