Investment banking group J.P. Morgan has sold off its entire portfolio of catastrophe bonds and other insurance-linked securities (ILS), citing its opinion of “value in the space” as the reason. Artemis understands portfolio manager Kyle Freeman is moving on from the company at the end of this year.
J.P. Morgan had reportedly seen a reduction in assets in its insurance-linked strategies, which could explain a reason behind the sale. But it’s clear the asset manager also found the asset class less interesting for its clients in 2016, resulting in a sell-off of a near $400 million portfolio consisting largely of catastrophe bonds over recent months.
In a recent commentary on one of the multi-asset funds that had invested in ILS, J.P. Morgan Asset Management explained; “Our Insurance Linked Securities book was reduced to 0% recently and remains there due to our opinion of value in the space.”
Furthermore, sources told Artemis that Kyle Freeman the portfolio manager in charge of the ILS and catastrophe bond investments at J.P. Morgan is set to leave the firm at the end of this year.
Freeman had been with J.P. Morgan since 2013, helping the firm to construct and trade its portfolio of cat bonds and ILS assets. Prior to his time at J.P. Morgan, Freeman was with risk modelling firm AIR Worldwide for just over a year and before that at primary insurer USAA for more than nine years where he worked on structuring the firms property catastrophe reinsurance program, including the Residential Re cat bonds.
It’s interesting that J.P. Morgan has elected to step back from ILS in 2016, a year when a number of other institutional investment groups have entered the sector, further growth in ILS has been seen and newer issues tend to be higher yielding.
It’s possible that on a risk adjusted basis J.P. Morgan no longer finds ILS as attractive for its investor base. It will be interesting to see whether the firm ever returns to ILS.