Man Group, a global independent alternative investment manager and 18.75% stake holder in the world’s largest insurance-linked securities (ILS) investment manager Nephila Capital, revealed $15m of commission income relating to the relationship in its results.
Man acquired a 25% stake in Nephila Capital back in 2008, but subsequently sold a portion of its share in the catastrophe reinsurance and weather risk investment manager to private equity and buyout giant KKR & Co. L.P. (Kohlberg Kravis Roberts) in 2013, leaving Man’s stake at 18.75%.
In the Man Group annual results that were announced yesterday the firm reported earning $15m of commission income from sales of Nephila Capital products in 2014. That’s a healthy increase from the $10m it earned in 2013, perhaps demonstrating the growing appeal of ILS and reinsurance as an asset class.
This is how the relationship benefits Nephila greatly, with Man marketing and selling Nephila products to its global investor client base, effectively growing Nephila’s distribution potential with the help of a globally recognised player.
Man reports its shares of post-tax profits from Nephila Capital as $9m for 2014 slightly down from $11m at the end of 2013, likely due to the decreased stake, but also perhaps reflecting the lower insurance rate environment a little as well.
Nephila Capital’s stakeholders Man and KKR greatly broaden the ILS managers reach, enabling it to access new pool’s of capital and a much larger investor base. With Nephila’s assets under management hovering around the $10 billion mark the firm is well positioned to benefit from both stakeholders reach when market conditions are right to grow once again.
But the relationship flows both ways, with each of the stakeholders benefitting from market-leading access to the insurance-linked asset class, as well as the ability to offer their clients access to the largest specialist catastrophe reinsurance and weather risk asset manager.