ILS Diversified Ltd., a fund-of-funds which invests in the insurance and reinsurance linked investments market via allocations to insurance-linked securities (ILS) funds, has outperformed the wider ILS fund market in its first month of operation.
ILS Diversified Ltd. was launched on 1st April by ILS Advisers, the firm behind the Eurekahedge ILS Advisers Index. The Bermuda domiciled fund actively invests in a selected group of ILS funds, aiming to achieve the best possible returns across the market.
ILS Advisers assesses and scores the majority of available ILS funds in the market, selects the top funds which it feels perform most strongly and have the lowest volatility and invests across them all. That gives the fund a spread across the insurance linked investment fund market, while also having an active selection element based on the managers knowledge and skills.
ILS Diversified Ltd. has now reported its first monthly return and the results are sure to impress its investors as well as onlookers. April performance for the fund in its USD share class was 0.45% (net of fees), which is above the market average return as recorded by the Eurekahedge ILS Advisers Index which came in at 0.31% for April.
The difference of 0.14% is telling and shows the ILS Diversified strategy of actively selecting managers to invest in to give the best spread of the market, with the lowest volatility and best performance has got off to an impressive start.
ILS Diversified has a higher allocation to ILS funds which invest in private ILS and ILW transactions compared to the Index, which goes some way to explaining the outperformance of the market. However the underlying ILS funds that ILS Diversified invests in also did better than the average, which shows that the active selection of sub-funds is an important part of this fund-of-funds strategy.
Stefan Kräuchi, founder of ILS Advisers and portfolio manager for ILS Diversified Ltd., told Artemis; “We are very pleased with the first month of performance of ILS Diversified Ltd. The outperformance versus the market in April shows that our approach to diversify across a selected number of ILS funds is working. While we have spread the risk across different geographies and perils we have been able to deliver an attractive risk adjusted return.”