Oppenheimer cat bond fund AuM stable, but losses evident in returns

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OppenheimerFunds, Inc, the asset manager that is in the process of being acquired by investment giant Invesco to create a $1.2 trillion global powerhouse, has seen the assets under management of its catastrophe bond and related insurance-linked security (ILS) fund stabilise, but losses are evident in the annual return figures.

down-arrow-profitThe Oppenheimer Master Event-Linked Bond Fund, LLC has net assets of just under $300 million as of March 31st 2018, which expanded to $373.2 million by the end of September 2018.

The figure has now stabilised somewhat, reported to be $369 million as of March 31st 2019.

However, loss impact is evident both in the value of the largely 144a catastrophe bond investments in the Oppenheimer fund, as it reports the cost of its investments as being $404.9 million, while the value of those investments is clearly lower, thanks to mark-to-market and realised losses to cat bonds impacted by the last two years of global catastrophe loss events.

The impact of these losses is also evident in the return figures for this cat bond fund, as Oppenheimer reveal that the total return of the fund over the six months to March 31st was -1.52%, while over the year the return was 3.68%.

Clearly the loss creep and newly realised losses of the last six months have hit the fund, as a number of catastrophe bonds have seen their value decline due to catastrophes including typhoon Jebi, plus further loss creep from hurricanes and wildfires.

Oppenheimer’s experience in the last six months is aligned with many other cat bond funds, many of which have also seen declines due to continued creep of prior year losses as well as the wildfires towards the end of last year.

Oppenheimer continues to confirm its confidence in the ability of catastrophe bonds to grow as an asset class though, and the manager often highlights the protection gap and under-insurance as opportunities for the capital markets as providers of reinsurance capacity.

Oppenheimer is also understood to still be in the process of launching an insurance-linked securities (ILS) interval mutual fund, which will be focused on collateralized reinsurance, reinsurance sidecars and privately negotiated quota shares.

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