Plenum Investments AG, the Zurich based specialist insurance-linked securities (ILS) and catastrophe bond investment manager, has announced the launch of a new UCITS investment strategy focused on the debt issuances of European insurers.
The Plenum European Insurance Bond Fund has launched with over EUR 20 million of assets.
It is a UCITS fund, offering daily liquidity to investors and exclusively invests in subordinated bonds issued by European insurance and reinsurance companies.
The company said that the new private insurance debt fund strategy targets “the sector-specific extra premium and the market inefficiencies in the area of European subordinated bond segment.”
The Plenum European Insurance Bond Fund will also invest in Restricted Tier 1 instruments (RT1), which the asset manager notes are increasingly becoming established as instruments in the European subordinated insurance and reinsurance bond market.
Daniel Grieger, partner and manager responsible for this line of business at Plenum, comemnted, “Subordinated bonds in the insurance segment boast an above-average premium in relation to the actual credit risk. They are perfectly suited to mitigate the challenges of the low interest rate environment.”
Plenum said that its portfolio management decisions for this new fund are led by an in-depth fundamental analysis, a focused approach and also regular exchanges with decision makers of the issuers, which are incorporated into a strategy designed to capitalise on the dynamics of the insurance and reinsurance industry
Rötger Franz, lead portfolio manager of the Plenum European Insurance Bond Fund, added, “In our niche, taking a deep dive is essential when it comes to providing additional added value.”
“Due to the niche character of insurance bonds, research capacities have been drastically reduced, prompting us to specifically develop our expertise in this market segment,” added Dr. Rainer Grünig, partner and CEO of Plenum Investments Ltd.
Plenum sees the new fund launch as a “crucial step” in its expansion into the area of insurance bonds, which began in 2020 with the successful launch of the Plenum Insurance Capital Fund.
The Plenum Insurance Capital Fund is a UCITS ILS fund strategy that allocates to both catastrophe risks and subordinated insurance debt instruments, and was launched in June 2020. The strategy had reached $100 million of assets by February this year.
“In times of increased inflation fears and high debt levels, investors are given the opportunity to optimize and adapt their existing portfolio to the challenges of today. While subordinated bonds of insurance companies are more volatile than traditional corporate bonds, their default rate is the lowest compared to other sectors,” Rötger Franz added. “In this niche sector, market dislocations are frequent. Our active management approach will help us to systematically exploit them.”
Plenum noted that its new fund can help investors strengthen the resilience of their portfolio and increase potential returns in current market conditions.
It can help to enhance the risk return ratio in the segment of bonds with a current average BBB rating, Plenum explained.
The Plenum European Insurance Bond Fund is available in currency-hedged share classes of CHF, EUR and USD, with duration risk limited to five years. The new subordinated debt focused fund is classified under Article 8 of the European Disclosure Regulation.