UCITS catastrophe bond funds positive in January despite wildfire mark-downs

Catastrophe bond fund strategies in the UCITS format averaged positive returns for the month of January 2025, despite the effects of wildfire related mark-downs to exposed positions, according to the latest data from the Plenum CAT Bond UCITS Fund Indices.

As we had reported before, the Los Angeles, California wildfires had already had a minimal effect on the UCITS cat bond fund cohort earlier in January.

We had estimated the write-down across the cat bonds tranches with more meaningful price movements at around $200 million, after the January 17th marks.

But, as we reported last week, additional price declines were seen in the secondary marks made at the end of last month.

Resulting in the first ever negative January for the cat bond market benchmark, the Swiss Re Index.

However, with the number of bonds affected still only a relatively small proportion of the outstanding catastrophe bond market, the majority of cat bond funds have been positive for the month of January 2025.

Which read across to the UCITS cat bond fund strategies, which we can now report averaged 0.49% for the month of January, since the last calculation point of the Plenum CAT Bond UCITS Fund Indices in the prior year.

The reason being, that catastrophe bond funds are continuing to benefit from significant coupon returns that have outpaced the market-wide impact of the recent devastating California wildfire.

The effect of the wildfire related cat bond price mark-downs are more evident if you look at the Plenum Index over a shorter period.

If you extrapolate out the Index returns over the calculation points between the last in December 2024 and first in January 2025, it gives an approximate return of 0.40%.

But, since the first Index calculation point of this year, at January 3rd 2025, the UCITS cat bond Index return to January 31st was only a still positive 0.08%, showing how the effects of wildfires impacted the market last month.

For the nearest trailing year, to January 31st 2025, the average UCITS cat bond fund return, according to the Index, is still running at a very healthy 12.48%.

The Low-Risk average return, for UCITS catastrophe bond funds with a lower expected loss, was 12.10% across the trailing year, while the High-Risk UCITS cat bond fund index averaged 12.80%.

Analyse UCITS cat bond fund performance, using the Plenum CAT Bond UCITS Fund Indices.

Analyse UCITS catastrophe bond fund assets under management using our charts here.

Analyse catastrophe bond market yields over time using this chart.