Hudson Structured raises $300m from Indiana & Maryland state pensions

Hudson Structured Capital Management Ltd., the insurance-linked securities (ILS), reinsurance and transportation focused investment manager that undertakes its insurance investment business as HSCM Bermuda, has raised new capital from two U.S. state retirement system pension funds in recent months.

According to documents from board of trustee meetings held by the Indiana Public Retirement System and the Maryland State Retirement and Pension System, both of the pension investors have selected Hudson Structured to manage some of their ILS and reinsurance linked investments for them.

ILS and reinsurance as an asset class is becoming increasingly main-stream for the large U.S. state retirement systems and pension funds, with allocations steadily increasing from these large institutional investors.

Pensions & Investments was the first to report the news that these two retirement system investment managers had between them allocated $300 million to reinsurance linked investment strategies from the Hudson Structured stable.

The board of trustee meeting documents for the Indiana Public Retirement System show that the pension has adjusted its ILS allocations somewhat.

The Indiana state pension fund, which has over $34 billion under management, has been invested in ILS for a while now, having an allocation to the Aeolus Capital Management operated Property Catastrophe Keystone Fund and to a fund managed by catastrophe and weather ILS specialist manager Nephila Capital.

But the Indiana retirement fund trustees are now looking to add more diversification to their ILS allocation and so have elected to redeem a $44 million allocation to a Nephila managed catastrophe fund and to allocate $100 million to a fund under the Hudson Structured platform.

Hudson Structured specialises in investing across the reinsurance market, offering broader and more diverse exposure than pure catastrophe risk alone.

The allocations to ILS are part of a growing use of alternative asset classes to diversify the portfolio of the Indiana state retirement fund. Now the diversification is also being sought within alternative classes as well. The investment leadership of the Indiana pension said they want to make their reinsurance market exposure more diverse with this move.

The Indiana state pension is retaining its currently $122 million allocation to Aeolus Capital Management, so with the new allocation to the Hudson Structured fund its ILS investments now total roughly $222 million.

Another state pension fund, the Maryland State Retirement and Pension System which has roughly $54 billion of assets, has selected Hudson Structured for an ILS allocation.

Earlier this summer the Maryland state pension allocated $200 million to strategies operated by Hudson Structured, under its HSCM Bermuda arm, as it looked to access broad insurance and reinsurance market returns.

The Maryland state pension had $314 million allocated to ILS within its opportunistic bucket, which we believe was largely allocated across two catastrophe focused reinsurance or ILS funds, Nephila’s Palmetto and Nimbus weather funds, as of the mid-point of 2018.

So following this $200 million allocation to Hudson Structured Capital Management, the pensions investments in ILS and reinsurance have grown considerably.

It’s encouraging to see these large state retirement funds beginning to show an appreciation for diversification within the ILS asset class, something that more large allocators are expected to embrace in time.

Hudson Structured reached $1.7 billion of reinsurance and ILS in committed capital and assets under management in July this year, with these commitments seemingly helping to drive the managers growth in 2019.