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Sarasin Cat Bond Fund becomes second ILS fund to restrict subscriptions


A second insurance-linked securities investment fund with a focus on catastrophe bonds as its assets has restricted new subscriptions in the last week due to a lack of primary market cat bond issuance. First we reported that the GAM Star Cat Bond fund was to operate a waiting list on new investor interest to throttle subscriptions and now we understand that the Bank Sarasin and Twelve Capital managed Sarasin Cat Bond Fund is to close to new investors completely.

The Sarasin Cat Bond Fund launched back in early March as a joint venture between Bank Sarasin and insurance-linked investment specialist fund manager Twelve Capital aiming to give Bank Sarasin customers access to the catastrophe bond asset class. During the four month period of its operation the fund has managed to attract $100m in capital from investors.

In an announcement, Twelve Capital who manage the portfolio of cat bonds for the fund, said that inflows of capital to the fund have exceeded the supply of cat bonds in the primary as well as secondary market and as a result the investment manager Sarasin Fund Management (Luxembourg) S.A. has taken the decision to close the fund to new subscriptions.

In order to achieve the funds aims of offering a well diversified portfolio of catastrophe bond risk with a high investment return it is necessary for there to be a constant supply of attractively priced cat bonds, said Twelve Capital in their announcement. The fund has been closed so as to avoid any dilution of the returns investors already subscribed to the fund receive. They say that they will revisit the decision to close the fund on a regular basis and hope to reopen it as soon as there is an improvement on the supply side of cat bonds.

This trend for funds to lock down subscriptions is something we are going to see more of unless cat bond or insurance-linked securities issuance becomes more consistent throughout the year. The slowdown during the hurricane season is inevitable, at least on U.S. wind issuance, but this is further evidence of investors desire to see transactions continue to come to market in sufficient volume to allow for deployment of the capital which would like to access the asset class. It wouldn’t surprise us to hear of additional funds with restrictions placed on them over the coming weeks.

Twelve Capital added that the closing of the Sarasin Cat Bond Fund does not affect the other ILS and cat bond investment offerings that they manage and that the rest of the Twelve Capital range of opportunities remain open for the time being.

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