The New Zealand Superannuation Fund is the fund for the state run retirement benefit (pension) available to all working New Zealanders. Many other countries have similar funds, the UK for example has the state run pension. In a first for a fund of its kind, it has announced that it will be investing some of its fund into catastrophe bonds.
The Guardians of the fund have said that they see catastrophe bonds as an attractive asset which offers them diversification and good risk-adjusted returns.
Initially they have said that they will invest $125m with the potential to grow that investment to $250m should it prove prudent. Most of the investment will be in U.S. based risks (so one must assume hurricane risks) with some European windstorm and Japanese quake risk too.
It’s really encouraging to see a large state fund such as this investing in cat bonds and once again highlights their strong attraction to investors right now.
The NZ Superannuation Fund has selected Elementum Advisors LLC (the recently formed ILS investment specialists) to manage this portion of the funds assets for them.