Franklin Templeton launches UCITS cat bond fund, managed by K2’s Malawer

Investment manager Franklin Templeton has launched a new UCITS catastrophe bond fund, which is portfolio managed by Jonathan Malawer from its hedge fund specialist manager arm K2 Advisors.

The Franklin K2 Cat Bond UCITS Fund is a Luxembourg based fund and part of the Franklin Templeton Alternatives Funds offering from the investment manager.

The new UCITS catastrophe bond fund will be widely marketed across Europe, being registered in eleven countries in total, including the UK, France, Germany and Italy.

The Franklin K2 Cat Bond UCITS Fund will be managed by K2 Advisors insurance-linked securities (ILS) and catastrophe bond lead Jonathan Malawer, Managing Director, Head of ILS, Commodities and Environmental Strategies.

Malawer has been with the hedge fund manager since 2007 and as well as leading ILS investing, also focused on commodities and environmental strategies, evaluating underlying hedge funds and selecting managers, as well as managing portfolios and selecting assets to invest in.

The Franklin K2 Cat Bond fund will aim to generate attractive risk-adjusted returns and compelling current income for its investors over time, while exhibiting limited correlation to other asset classes through its focus on investing in a portfolio of natural catastrophe bonds.

The timing is good and it’s no surprise to see a new UCITS cat bond fund strategy launching right now.

The high levels of issuance seen in the global cat bond market and also the expanding use among insurance and reinsurance company sponsors, as well as other entities seeking an efficient source of risk transfer capacity, all provide additional headroom for new strategies to be launched and new managers to enter the cat bond and ILS space.

The investment manager also launched another alternative UCITS strategy today, the Franklin K2 Athena Risk Premia UCITS Fund, focused on alternative risk premia asset classes in general, which could also include some ILS.

Bill Santos, Senior Managing Director, K2 Advisors, commented on the launch, “We are delighted to be adding the Franklin K2 Cat Bond and Franklin K2 Athena Risk Premia funds to the FTAF range. Since the launch of our flagship fund in 2013, we have experienced growing demand for K2 Advisors’ full suite of investment research and management capabilities, along with risk and performance analytics services, in a transparent and liquid UCITS structure. We are continuing to see client demand for advisory, portfolio completion and hedge fund manager access services.”

Julian Ide, Head of EMEA distribution, Franklin Templeton, added, “The launch of the Franklin K2 Cat Bond and Franklin K2 Athena Risk Premia funds is another milestone in our commitment to broadening our UCITS range of liquid hedge strategies and alternative investment capabilities. As one of the biggest providers of alternative solutions globally with $131 billion in AUM, our goal is to provide a choice of differentiated strategies within our cost-effective product range of liquid alternative solutions to European clients. We believe these new funds may be attractive for investors seeking to reduce volatility and improve portfolio returns, especially in today’s uncertain environment.”

Being a UCITS (or Undertakings for the Collective Investment in Transferable Securities) fund format, the new catastrophe bond fund will offer investors daily liquidity and transparency, while meeting the necessary European rules to qualify under the UCITS framework.

As of this May 2021 and prior to Franklin Templeton’s entry into the UCITS cat bond fund space, Artemis’ data shows there were at least 15 individual UCITS cat bond funds offered in the market, with more than $8 billion of assets under management held between them.