Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Rising secondary catastrophe bond prices help Plenum to highest monthly return


The recent unseasonal trend for rising outstanding catastrophe bond prices in the secondary market, when it is more typical for them to be falling at this time of year, has helped Swiss insurance-linked securities investment manager Plenum Investments achieve their best monthly return ever. June saw Plenum’s USD denominated ILS fund return 1.26%, a very healthy return for a single month and the highest since the funds inception.

Plenum put some numbers to the price increases seen on outstanding cat bonds during the month of June. In a month which would usually be experiencing price weakening, there were some fairly significant price rises across many cat bond perils. For example, U.S. hurricane cat bonds and multi peril bonds increased around 1%, European windstorm bonds increased 0.5%, Japan earthquake cat bonds increased by 1% and Japan typhoon bonds increased by around 2%.

This is interesting as these numbers clearly show that demand in the secondary cat bond market has remained high during June and that demand has been across the market, not just focused on diversifying peril transactions. At this time of year it is normal for some diversifying perils to see small price rises as investors seek to balance portfolios as the hurricane season begins, but here we’re seeing price increases across the board.

Plenum attribute their funds June performance rise to significant price increases of their cat bond positions as well as the low cash ratio they operate within the fund. Over the coming months they foresee continued spread tightening on U.S. hurricane exposed cat bonds and expect this will lead to further positive performance of their funds over the coming months..

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