Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Plenum may target UK with catastrophe bond fund


Swiss insurance-linked securities investment manager Plenum Investments may target UK retail investors with its catastrophe bond fund if there is sufficient interest to bring the fund there, according to comments from Plenum’s chief executive Rainer Grünig. Quoted in the FT Adviser, Grünig said that the Plenum CAT Bond Fund, which is currently available in Swiss Franc, Dollar and Euro share classes, could also be launched in Sterling for the UK market if there is strong interest.

The Plenum CAT Bond Fund is a Liechtenstein domiciled UCITS III structured fund with total assets under management of $22m. The minimum commitment required from investors is low, just 100 Swiss Francs, dollars or euros, so although Plenum predominantly target institutional investors this makes it ideal for marketing to retail investors looking for a non-correlated investment opportunity in risk. The fund has a relatively low performance target for a cat bond fund of just Libor plus 4% and in 2012 has so far outperformed that and returned 4.21% in the USD share class. This type of lower risk ILS fund investing solely in catastrophe bonds could be a perfect introduction to the asset class for some retail investors such as high-net-worth individuals.

The FTAdviser article notes that investments in cat bonds can be hard to explain and sell to retail investors, as the concept of investing in catastrophe risk and portfolio diversification across perils is not the simplest to understand. For retail investors the ILS investment strategy would be very new and so any fund seeking to launch a retail strategy needs to spend a lot of time educating investors and ensuring its marketing documents are simple to understand. The article also notes that investors can tend to confuse ILS funds with life settlement funds to which Grünig responded; “When people understand what we are doing here, they will understand that it has nothing to do with life settlements.”

Grünig told us by email; “We are evaluating the appropriate form to target retail clients, all in line with the existing regulations and therefore we are not fully ready yet as the fund does not have reporting status in the UK.”

There have been some successful retail investor focused cat bond fund launches in the UK lately, including GAM with its star cat bond fund.

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