Over a month ago we covered investment manager Dexion Capital’s plans to expand and grow their DCG Iris Ltd. insurance-linked security fund through a series of share offerings. The ILS fund, which launched back in June, has its shares listed on the London stock Exchange (LSE) and acts as a feeder fund and invests all of its capital assets in Credit Suisse’s CS IRIS Low Volatility Plus Fund. Now, thanks to the uncertainty that remains around hurricane Sandy, the first share offering has been postponed.
DCG Iris launched with £40.1m raised to invest in the CS IRIS fund. By feeding the capital into CS Iris it 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 but fundraising for an equity based ILS fund proved difficult, as did most equity offerings at the time. So Dexion had planned to try to reach £150m by the end of June 2013, with the first share offering expected by the end of the year.
That share offering had been scheduled for tomorrow, the 22nd November, but now a stock exchange announcement from Dexion Capital says that it is being pushed back by three weeks. The announcement says that in light of the wide range of economic and insured loss estimates from hurricane Sandy and in advance of more definitive information on the impact on the Master Fund’s (CS Iris’) contracts, the board has decided to postpone the 22nd November share offering. The board anticipate that the offering will now take place on or around the 14th December and will make a further announcement once that is confirmed.
Credit Suisse had put the industry loss from hurricane Sandy at up to $18 billion, but admitted at the time that there was much uncertainty surrounding the final loss figure from the storm. Credit Suisse had already put a discount on the latest published net asset value of their funds, and also on DCG Iris’ NAV, but that was based on industry losses of between $10 billion to $20 billion which it said could impact the DCG Iris fund by up to 0.6%. Were industry losses to leap above that range Credit Suisse had said that if insurance industry loss estimates rose much further the loss suffered by their ILS funds could increase disproportionately.
Delaying the share offering at this time is a sensible move as Dexion Capital most likely want to avoid anyone coming into the fund when any losses, or further reduction in NAV, it faces is still so uncertain. Some investors would shy away from a new offering at this time with the spectre of Sandy still looming anyway, so by holding back until it can say with confidence what impact hurricane Sandy has had the DCG Iris share offering will likely secure a larger placement too.
We’ll update you when we hear anymore about this share offering or the impact to the DCG Iris and CS Iris ILS funds.