Plenum partners with Winterthur AWI on insurance debt strategy

Plenum Investments AG, the Zurich based specialist insurance-linked securities (ILS) and catastrophe bond investment manager, has announced a partnership with the Winterthur AWI pension fund investment group that will see it manage a subordinated insurance debt strategy.

Plenum will manage an investment strategy focused on the high-yield segment of insurance bonds, mostly focused on subordinated bonds of largely Europe-based insurance companies.

Named the “Alternative Investment Group” Insurance Debt Europe Hedged CHF, the investment strategy rounds out a range of products targeted at pension funds in the high-yield segment of insurance bonds, Plenum explained.

The strategy has an investment target of delivering a long-term stable net return to investors of between 3% and 3.5% in CHF.

To achieve this, Plenum is using a Swiss structure that will invest in subordinated bonds of mostly Europe-based insurance companies, so subordinated or private insurance debt instruments.

Plenum said that this can provide efficient access to the less liquid tier 2 area of the market, featuring the issues of smaller insurers, as well as restricted tier 1 issues which are increasingly gaining traction in the European subordinated bond market.

Because it is harder to access and more private, investors can benefit from sector, rating and illiquidity premiums when they access this area of the insurance debt asset class.

Plenum also said that the structure has been designed so that both pension funds and other institutional investors can invest in it.

Winterthur für Personalvor­sorge (AWI) is an investment foundation that was set up in 1984 by 14 pension funds with a goal to jointly invest plan assets. Today it has more than 170 investors involved.

Daniel Grieger, partner and the manager responsible for private debt investing at Plenum explained, “The segment of less liquid private placements of insurance companies is ideally suited for pension funds and we are very pleased to have AWI at our side. Over many years, they have proven their success in alternative investments. Subordinated insurance bonds are the logical next step.”

Rötger Franz, partner and portfolio manager at Plenum added, “As inflation and debt concerns grow, investors get the opportunity to optimize and adapt their existing portfolio to today’s challenges. Compared to other sectors, subordinated insurance bonds boast an above-average premium for the actual credit risk.”

Michael Zuppiger, managing director and head of market development at AWI, also said, “We are excited to welcome Plenum as a competent and specialized partner in this bond segment, since European subordinated insurance bonds perfectly complement our existing strategies. Moreover, they offer pension funds the opportunity to receive attractive risk premiums in a highly regulated environment.”