Schroders fund to invest in catastrophe bonds

Damaged houseSchroders has launched a fund investing in catastrophe bonds linked to natural disasters such as hurricanes and earthquakes.

The firm says the fund can invest in other insurance-linked securities, which may be linked to man-made risks in the aviation and offshore energy industries, but will not buy life insurance.

The launch of the Core Insurance Linked Securities fund follows Schroders acquisition of a 30% stake in Secquaero Advisors, a Swiss-based insurance-linked securities and reinsurance investment manager.

“Due to the fund’s ability to access a wider universe of non-life insurance risks, it provides excellent diversification and downside risk control,” says Daniel Ineichen, lead manager of the fund.

Catastrophe bonds are appealing because their performance is linked to events, such as hurricanes, which are not correlated with financial markets.

In an interview with Massimo Tosato, executive vice chairman at Schroders, in the October 2013 issue of Funds Europe, Tosato says Schroders expects the catastrophe bond market to grow to $80-100 billion over the next five years from an estimated $50 billion now.

©2013 funds europe