The BBC, or British Broadcasting Corporation to give the television and radio production company its full name, has a £9 billion pension scheme which as you’d expect has a significant portion of its assets invested in various alternative asset types. One of those alternatives that the BBC has chosen to invest a portion of the pension scheme in is insurance-linked securities including catastrophe bonds.
Nephila Capital are the investment manager who received the mandate to invest £76m of the BBC pension scheme in insurance-linked securities, mainly catastrophe bonds we understand. The mandate began at some point during the last financial year leading up to the end of March 2011 when the BBC pension scheme published its annual report and accounts (which you can see here).
The £76m insurance-linked securities investment hasn’t had the easiest of times though and has made a small loss over the time the mandate has been in place. The value of the ILS assets at the 31st March were £72.2m showing that the investment had lost £3.8m since it was mandated. That’s no surprise given the drop in value of many catastrophe bond assets after the earthquake in Japan and other heavy catastrophe losses of Q1 2011.
It’s likely that the catastrophe bond assets that Nephila Capital are managing on behalf of the BBC pension scheme will have recovered some of those losses during Q2. We have reported previously that most cat bonds have recovered some or all of their pricing losses and that trend is expected to continue throughout the rest of this year as long as we don’t experience any more major catastrophe events.
If that trend continues throughout the rest of the year and the insurance-linked securities assets perform as the market is used to then the BBC pension scheme should see positive growth from this segment of their pension scheme investment strategy.