The Pioneer ILS Interval Fund, U.S. mutual fund manager Pioneer Investments interval style insurance-linked securities and reinsurance linked investment fund, has seen its assets increase by 16% to reach $111 million and has returned 6% in the last half-year.
Steady growth has been the order of the day for the interval insurance-linked investments fund from Pioneer Investments. Steady returns have also been a feature, demonstrating the potential for stable returns, with low correlation to broader financial indicators, from a diversified basket of reinsurance linked assets.
The mutual fund manager, with around $249 billion of assets under management globally and $67 billion in the U.S., launched the Interval ILS fund in late 2014.
Pioneer reported $54.66m of insurance-linked assets managed in the ILS Interval fund by May 2015, which grew by 18% to $64.4m by the end of July 2015, then increased again by another 17% to $75.4m. and at the last reporting point increased a further 27% to almost $96 million at the 31st January 2016.
Now, at the latest quarterly reporting interval at 3oth April 2016, Pioneer Investments reports that additional investor inflows have helped to grow the Interval ILS fund by a further 16% to $111 million. In the last twelve months the Pioneer ILS Interval Fund has doubled in size.
Returns are reported again in the latest semi-annual report for the ILS Interval fund, with the investment manager reporting that the fund returned 6.01% in the six months to the end of April 2016. This compares to a mere 0.14% return for the fund’s benchmark, the Bank of America Merrill Lynch 3-Month US Treasury Bill Index.
In the prior six month period the Pioneer ILS Interval fund returned 5.9%, so over the last year a near 12% return has been achieved for its investors, a very attractive proposition in the current low-interest financial climate.
The Pioneer ILS Interval fund’s portfolio managers, Charles Melchreit and Chin Liu, said that the six month period to the 30th April 2016 was characterised by low levels of catastrophe losses (in the main), a recovery on the MultiCat catastrophe bond (which the fund had written down but then recovered in value and paid investors a coupon, helping performance), but then performance did take a small hit due to the flooding in the UK in December 2015.
The Pioneer ILS Interval fund allocates its capital between catastrophe bonds, collateralised reinsurance sidecars, private ILS transactions and segregated account transactions, such as quota shares, hence it has a broad, global exposure to catastrophe events.
That means events such as the UK floods are always likely to hit some of the ILS assets held in the fund, but the diversified nature of the portfolio hopes to keep any impacts to a minimum. It’s possible that the fund will feel some impact from catastrophe events such as the Canadian wildfires, or U.S. convective storms, in the latest quarter, which we’ll likely see at the next half-yearly reporting interval.
At the end of April 2016 the Pioneer ILS Interval fund remained most exposed to U.S. hurricane risks, with around April 30, 2016, potential hurricanes (around 40% of the fund’s risk). The rest of the portfolio is largely natural catastrophe exposed, but the managers noted that some exposure to man-made disasters and specialty lines business can be seen from aviation, marine, or energy related risks.
The Pioneer ILS Interval fund’s top positions include a variety of segregated account reinsurance quota shares, and well-known transactions such as insurer Brit’s Versutus sidecar, Munich Re’s Eden Re II sidecar, Swiss Re’s Sector Re V sidecar, PartnerRe’s Lorenz Re SPI, Aspen’s Silverton Re sidecar and TransRe’s Pangaea Re vehicle.
The largest single positions at April 20th 2016 are a Kane SAC segregated account named Gullane, which makes up 10.5% of the portfolios, as well as one tranche of Brit’s Versutus reinsurance sidecar, another segregated account named Gleneagles, Munich Re’s Eden Re II sidecar, the Pangaea Re sidecar and PartnerRe’s Lorenz Re.
The ILS Interval fund is just one of Pioneer’s activities in the insurance-linked investments space, with around $1.6 billion in ILS and reinsurance linked assets managed across a range of multi-asset strategy funds, with a portion of each of its multi-class strategies assets allocated to reinsurance-linked investments.
The Pioneer ILS Interval fund is its first dedicated insurance-linked securities (ILS) strategy and while growth has not been as fast as other mutual ILS funds, the steady expansion and attractive returns achieved should ensure further inflows are seen in quarters to come.