Fermat sets up US cat bond fund structure to support taxable investor access to asset class

Fermat Capital Management, the specialist catastrophe bond and insurance-linked securities (ILS) investment manager, has set up and launched a United States domiciled cat bond fund structure to support access to the asset class for US taxable investors and those that cannot invest offshore, Artemis can report.

Fermat Capital Management manages significant catastrophe bond funds already, with an estimated more than US $10 billion of insurance-linked securities assets under management at this time.

But the investment manager has long been under-weight allocations from the United States, having built its business with strong support from investors in other regions, such as Europe, Asia Pacific and Australasia.

Now, filings seen by Artemis show that Fermat has established a fund structure that will enable US taxable investors an efficient way to access the catastrophe bond asset class, as it increases its focus on the opportunity to tap into the US investor community in a bigger way.

The information we’ve seen shows that Fermat Capital Management has established two Delaware located fund structures to establish this US investor focused catastrophe bond fund.

These are the first US investor-friendly vehicles that the investment manager has launched in its long-history, we understand.

The fund structure that will be offered to investors is understood to be the Fermat Cat Bond Fund (Delaware), LP, while that fund has a general partner of Fermat U.S. Feeder GP, LLC, both of which are Delaware located.

These new Delaware cat bond fund structures managed by Fermat will feed into the manager’s flagship Fermat Cat Bond Fund, a Cayman Islands fund structure that has a track record dating back to 2004 and somewhere north of $3 billion of assets at this time.

Presumably, the new US based cat bond fund structure will facilitate Fermat’s goal to bring onboard more US-based investors, with a US domiciled investment structure more appealing to taxable and certain larger allocators.

In addition, there are many large US institutional investors that cannot invest easily in offshore fund structures, for regulatory and rules-based reasons.

Hence, a US cat bond fund can open up access to an entirely new investor community, who previously an ILS manager like Fermat Capital Management might not have been able to offer its ILS investment strategies to.