Our ability to invest consistently (in ILS) is a huge advantage: Quantedge CEO

Quantedge Capital, the Singapore-based hedge fund asset manager, recognises that consistency in terms of its capital deployment to the insurance-linked securities asset class is key, as it enables the firm to be there when losses hit and it can benefit from hardening prices, CEO Suhaimi Zainul-Abidin explained in a recent podcast interview.

Speaking with the Top Traders Unplugged podcast, Zainul-Abidin explained that how Quantedge Capital thinks about risk premia across all the asset classes it allocates to, which is helpful in understanding how the firm thinks about the ILS asset class and reinsurance.

Quantedge manages approaching US $8 billion in its flagship systematic global hedge fund strategy, which has allocations across multiple asset classes such as equities, bonds, commodities, currencies and insurance-linked securities and had delivered a 20.9% net annualised return as of September 30th 2026.

The hedge fund began allocating to ILS through catastrophe bonds in 2011, expanding its appetite out first to reinsurance sidecars and later to collateralized and fronted reinsurance or retrocession.

ILS, as an asset class, exhibits all of the risk premia potential that Quantedge looks for and its CEO has even called ILS the purest form of risk premia in the past.

He’s not a frequently heard from speaker though, particularly on this asset class, so we felt his comments during this podcast worth highlighting, to provide more of an insight into how the hedge fund manager feels about its ILS investments.

During this podcast, Zainul-Abidin explained on risk premia, “A risk premia strategy is one which accepts risk essentially in exchange for an expected return. Right? So, we can think about it quite simply as what happens in an insurance contract. Every one of us, we buy insurance, you buy insurance, I do as well, to protect against risks that we don’t want to bear. And to hive off that risk, we’re willing to pay somebody to take it on. And typically, that would be the insurance company.

“The insurance company, with all the knowledge and information and data that they have, know what is the fair price for that risk. But instead of charging you the fair price for it, they would charge you a premium. And that exists, obviously, in the insurance market.

“But what we’ve noticed, based on our analysis and study of the markets, is actually that kind of risk transfer happens everywhere. In the equity markets, in the bond markets, commodity markets, there is always some kind of risk transfer. In fact, we think most markets exist for the purpose of risk transfer and that risk transfer could be just by virtue of being the capital provider taking on equity risk. But that kind of risk deserves a return, and the market adjusts itself to give participants the necessary return. So, we’re in all these markets trying to harvest this risk premia over time.”

Quantedge Capital, typically known for being a systematic investor, still sees investing into the insurance-linked securities as having systematic qualities, even as most of the transactions entered into are privately negotiated.

The CEO explained, “So, the systematic nature of the ILS investments that we do would be confined to the way that we analyse the deals. So, there’s a systematic way for us to decide how we want to allocate our risk budget to insurance linked securities and we want to achieve the same kind of diversification that we do in our general markets portfolio or general finance portfolio.

“That means it’s hugely, hugely diversified across geographies, across perils. Meaning that we want to have exposure to hurricane risks, and earthquake risks, and wildfire risk, and cybersecurity risks, satellite risk, all sorts of things. We want to have great diversification.

“In that respect, it’s systematic, but it is a market that is difficult to access. It is obviously not a public market. There are no exchanges to trade them on, which means there is an aspect of that business that is quite bespoke. We have to go to cedents and counterparties and negotiate deal by deal essentially.”

Which of course also helps in starting to explain why the Quantedge CEO sees ILS as an asset class to be consistent in.

Zainul-Abidin explained the return potential of the ILS and reinsurance asset class, “It varies from year to year, like any market and we’d analyse the expected returns from ILS on a year-to-year basis. It really depends on the amount of capital that’s going to the markets, the risk aversion, whether or not there’s been a catastrophe event that has maybe sometimes sucked money out of the markets the previous year. So, a lot of factors go into it but we would expect, in some years, and in fact over the long term, that you could get potentially 20% returns on cash, which is pretty healthy, pretty juicy.”

Quantedge Capital recognises that its investments into ILS and reinsurance will take losses over-time and having been in the asset class since 2011 the hedge fund will have taken its share, but being there to provide capital to the industry following loss activity is one of the benefits of a consistent approach.

Zainul-Abidin acknowledged that losses will happen, “Of course, absolutely and it doesn’t look pretty when it happens. But that’s the nature of risk premia. Right? Over time you get paid out, but you get paid out exactly because you’re willing to bear that risk and from time to time take the hit. So, a lot of the strategies within our portfolio have those kinds of characteristics.

“It’s like investing in the equity markets. From time to time there is going to be a big correction, and the markets are paying you to take that risk. That is the nature of risk premia.

“But we want to be in that space. In fact, I think our ability to invest consistently through those kinds of ups and downs gives us a huge advantage. Because if you notice, particularly in the ILS space, whenever something bad materialises and all the risk takers take a hit because there’s a sizable loss, you will see that capital drains out of the market the following year. But as a result of that, the premiums go up a lot. So, we want to be there for when that happens.”

You can find the full Top Traders Unplugged podcast episode here.