Schroders raises $420m for new Life Insurance-Linked Security (ILS) fund

Global investment manager Schroders has raised $420 million of capital from third-party institutional investors for a new life insurance-linked securities (ILS) fund strategy that it has launched.

The newly-launched Life Insurance-Linked Security (ILS) fund, Life Insurance Linked II, offers its investors a way to gain significant diversification against traditional asset classes, Schroders explained.

The life ILS fund also offers its investors the prospect of attractive risk-adjusted returns, the asset manager said today.

Life Insurance Linked II is a closed-end investment fund, with a 10-year maturity and Schroders will manage it alongside a number of existing Life ILS funds and life ILS mandates it operates.

Schroders notes that the timing is good, as interest in Life ILS solutions remains strong in the global life insurance sector.

Scott Mitchell, Portfolio Manager for Life ILS, will be the lead manager for the new fund, supported by Schroders team of specialist Life ILS investment professionals.

Scott Mitchell, Portfolio Manager for Life ILS at Schroders, commented on the news, “Building on the successful launch of Schroders’ Life ILS strategy in 2017, we continue to focus on innovative trades similar to those we have supported in recent years. This latest capital raise, combined with a fund structure that caters for the illiquidity and duration profile of complex life deals, means that Schroders remains ideally positioned to support the industry’s and clients’ needs at a time of heightened focus on risk, capital and liquidity management.”

Stephan Ruoff, Head of ILS at Schroders, added, “The launch of the new fund represents another milestone in Schroders’ ongoing growth in Life ILS. We have been active in the life insurance market since the launch of our first ILS fund in 2008. Our longstanding experience continues to contribute to the success of not only Life ILS, but also Schroders’ blended ILS (life and non-life) strategies.”

Claire Glennon, Co-Head of UK and Ireland Institutional, Schroders, also said, “This strategy is positioned to deliver secure income that helps support cash-flow driven requirements, robust yields and a strong diversifying element to our clients’ investment portfolios.

“Pension schemes are increasingly looking to increase their exposures to alternative assets and ILS strategies are well positioned to meet these investment objectives.”

Schroders highlighted its recent survey, which we covered here at the time, that suggests investors are looking to increase their exposures to private asset classes and alternatives at this time.

Investors see private asset classes and alternatives as a way to help them manage risk, with the diversification offering less correlated sources of return and a defensive play against financial market’s broader movements.

Schroders Private Assets and Alternatives business, which includes its insurance-linked securities (ILS) investment offerings, is a strategic growth area for the firm and currently manages £45.3 billion as of June 30th 2020.