Specialist insurance-linked securities manager Twelve Securis has launched a new insurance-linked investment fund strategy that will primarily focus on Restricted Tier 1 (RT1) insurance debt instruments.
According to the firm, the new strategy, which is called The Twelve Securis Credit Fund, aims to deliver attractive risk-adjusted returns by investing primarily in RT1 debt issued by insurance companies.
Moreover, Restricted Tier 1 (RT1) signifies an expanding and attractive portion of the insurance credit market, providing an average of roughly 150 basis points of additional spread in comparison to insurance Tier 2 debt and about 200 basis points relative to corporate debt with similar ratings.
Twelve Securis observed that, from an investment standpoint, the new fund will offer enhanced carry and access to the highest spread levels within a robust investment-grade fixed income segment, backed by a sector that has one of the lowest historical default rates.
Additionally, from a portfolio construction perspective, RT1 presents an extra source of diversification within a fixed income portfolio and can act as an alternative or complement to an allocation in AT1-focused financial funds, which frequently constitute a core allocation in institutional portfolios.
“The launch of the Twelve Securis Credit Fund reflects our conviction that insurance Restricted Tier 1 debt has matured into a compelling standalone asset class. RT1 offers elevated carry and some of the highest spreads available within investment-grade fixed income, supported by a sector with one of the lowest historical default rates,” Dinesh Pawar, Head of Insurance Debt, Twelve Securis explained to Artemis.
“Having invested in RT1 since its first issuance in 2017, we believe now is the right time to offer investors dedicated access to this growing market.”
Pawar continued: “For investors, RT1 provides an attractive combination of enhanced risk-adjusted returns and diversification. It can complement traditional fixed income and serve as an alternative to bank AT1 strategies, while benefiting from the structural strengths of the insurance sector. Our long-standing analytical framework and ability to invest flexibly across the insurance capital structure position us well to manage risks and capture opportunities as the market continues to expand.”
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