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Oppenheimer cat bond fund AuM rises, forecasts market growth


The brisk issuance seen in the catastrophe bond market so far in 2017, which has resulted in the market achieving a new record size of over $29 billion in recent weeks, has helped investment manager OFI Global which is an Oppenheimer company, increase the size of its global cat bond strategy back to near highs.

Investment fund managers have found ample catastrophe bond issuance in recent weeks to help them increase their allocations to the asset class and Oppenheimer, whose OFI Global Cat Bond Strategy has shrunk in recent years, has been able to get its allocations to the asset class almost back to levels last seen over three years ago.

As long ago as 2013 Oppenheimer lifted its catastrophe bond assets under management to just short of an impressive $400 million, which we believe may have been the largest the strategy had been.

While issuance of cat bond hit a record in 2014 and was still relatively strong in 2015 and 2016, the strategy shrank, which is likely a response to the sharp reduction in cat bond coupon pricing that was seen through 2014 and into 15/16.

By the second-half of 2016 the strategy had contracted down to nearer $300 million, but the accelerated issuance seen through the last six months or more appears to have helped Oppenheimer to allocate more of its clients capital to catastrophe bonds once again.

According to its latest report, the OFI Global Cat Bond Strategy has now increased in size to $361.8 million, as of the end of April 2017. The Oppenheimer Master Event-Linked Bond Fund, LLC, a subset of that, had $276 million of assets at the end of March 2017.

Oppenheimer commented on the “heavy new issue calendar” that it said is “now emerging to be the big story of the first half of the year.”

“Investors and dealers entered the year with growing expectations of a tepid issuance calendar compared to recent years,” the asset manager explained.

But with issuance on course for records in 2017, Oppenheimer said that this “Serves as an early indication that the catastrophe bond market could be poised for potential expansion in 2017, following two years of minimal growth.”

“Evidence of this market growth can be seen not only by the amount of new issuance but by the expanding roster of sponsors and risks that have come to market,” Oppenheimer continued.

The asset manager also noted the gradual expansion of the market through private catastrophe bonds, which often introduces new sponsors to the capital markets as a source of risk transfer capacity.

“A handful of sponsors now view this market as alternative to the 144A market because there is lighter disclosure documentation and the absence of independent modeling analysis,” they continued, adding that the market is accepting of these private cat bonds because “investors now have access to the same catastrophe modeling software that is used by the independent risk modelers in the 144A market.”

So, encouraging words from Oppenheimer, one of the multi-asset class investment managers that operates a dedicated catastrophe bond strategy.

The record pace of issuance in the catastrophe bond market through the first-half of 2017 has benefitted many fund managers, ILS focused and multi-asset class alike, as we wrote here recently.

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