The Pioneer ILS Interval Fund, a dedicated insurance-linked securities (ILS) focused mutual investment fund strategy operated by Amundi Pioneer Investment Management, has reported net asset growth in the last quarter, for the first time in one year.
The Pioneer ILS Interval Fund provides its investors with broad exposure to major global catastrophe events, given its allocation to reinsurance and retrocession markets, largely through sidecars (62.8% of the portfolio), private collateralized reinsurance and ILS deals (21.5%), catastrophe bonds (13.6%) and industry loss warranties (ILW’s) (2.1%).
This mutual ILS investment fund took its fair share of losses from the catastrophes around the world through 2017, 2018 and 2019, following which the investment manager Amundi Pioneer has been dealing with the handling and paying of claims and losses for cedants and counterparties.
As a result the ILS fund experienced some churn in terms of assets and possibly investors as well, with the losses towards the second-half of 2018 seemingly the trigger that began the decline, as was seen across almost the entire ILS fund market at the time.
Amundi Pioneer had expanded its mutual ILS funds net assets to $992 million by October 31st 2018, which was the largest size the fund reported in its quarterly disclosures.
After the impacts of 2018 losses, in particular the California wildfires in the last quarter of that year, the Pioneer ILS Interval fund then shrank to $904 million of net assets as of January 31st 2019, then $876.3 million at April 30th 2019, and finally to $819.9 million at July 31st 2019.
As well as the California wildfires it was also loss creep from Japanese typhoon Jebi through early 2019 that dented this ILS fund, as ceding companies adjusted and increased their loss estimates from that storm, affecting quota shares and sidecars.
But with the loss from the wildfires and Jebi now settling and fresh global catastrophe losses in 2019 less impactful to the reinsurance industry than was seen in the previous two years, the Amundi Pioneer ILS fund is now beginning to recover and regain some growth.
As of October 31st 2019 the Pioneer ILS Interval Fund reported its total net assets as being $831.64 million, an increase in the quarter of just under 1.5%.
Some of this seems to be appreciation of certain positions in the portfolio, but it does also look like Amundi Pioneer may have attracted some fresh inflows of capital as well, albeit relatively small it seems.
But the fact the ILS fund has returned to growth and losses have stabilised considerably bodes well for Amundi Pioneer and will have put the portfolio managers in a much stronger position for the end of 2019 and renewal period than in the previous two years.
Given we’re now through the key January 2020 reinsurance renewals there is every chance the fund could be a little bigger again, as it’s likely the managers will have taken the opportunity of improved reinsurance pricing conditions to raise some more fresh capital to put to work.
The difference between cost and valuation of positions appears much more stable, on analysis of the portfolio disclosure, with many ILS positions gaining that were already in the portfolio and just a handful of new investment positions taken as well, especially in catastrophe bonds.
There is evidence of some attrition to positions due to the Japanese typhoon activity in September and October 2019, but it does not appear particularly severe and it’s almost certain that the portfolio managers will have marked down positions much more vigorously for 2019’s Hagibis and Faxai than the market did with 2018’s Jebi.
For investors in the Pioneer ILS Interval fund this all bodes well, as it suggests a continuing recovery within the portfolio, with some positions maturing and rolling off-risk, while at the same time some fresh investments are added in their stead as the portfolio managers continue to actively manage the funds exposure.
Amundi Pioneer’s overall insurance-linked assets under management, which includes ILS assets managed in multi-asset fund strategies as well as its dedicated ILS interval fund, fell to $1.9 billion as of September 30th 2019, having previously been as high as $2.3 billion.