UCITS catastrophe bond funds see sluggish growth in first half

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Assets under management (AUM) of the major UCITS catastrophe bond funds as a group increased by only 1.2% during the first half of 2022, which partly explains the tight capacity in recent months.

After growing rapidly from assets under management from just under $5 billion at the end of April 2020 to over $8 billion at the end of April 2021, growth in the UCITS cat bond fund category of fund structures Insurance Linked Securities (ILS) has been most stable through late last year and much slower through 2022 so far.

This is a massive 62% growth in assets under management for UCITS cat bond funds as a group over this 12 month period from the end of April 2021.

For the remainder of last year, growth in assets under management for cat UCITS bond funds slowed to 7% over the 9-month period.

The slowdown is therefore clear, as the AUM of cat UCITS bond funds only increased by 1.2% during the first half of 2022, reaching more than $8.77 billion at the end of June, according to the data. of Artemis.

We track UCITS cat bond fund assets here in this chart with the help of our partner Plenum Investments AG, an investment manager specializing in insurance-linked securities (ILS) and cat cat bonds.

Growth in UCITS bond fund assets was around 28% in 2021, but in the first quarter of 2022 it slowed to only around 1.1% in the first quarter, to just under 8.72 billion. dollars at the end of March 2022.

Despite the strong period of catastrophe bond issuance in the second quarter of the year, assets in the UCITS catastrophe bond fund category only increased by 0.2%, bringing the first half growth to only 1.2%.

Weak asset growth in the catastrophe bond funds of these major market contributors aligns with recent dynamics in the catastrophe bond market, where a lack of new inflows has been one of the factors exacerbating the recent widening of spreads .

Analyze the growth of UCITS catastrophe bond fund assets using our charts here.

As we have explained, many of the largest catastrophe bond funds had seen their managers raise new capital in 2021, with much of the additional capacity fully deployed by the time the debt issuance pipeline Catastrophe bonds have exploded this year.

This is clearly evident in the strong asset accumulation of these major UCITS catastrophe bond funds over the past year, as well as the more recent downturn, in the Artemis chart below.

Assets of the UCITS catastrophe bond fund by month - until the end of June 2022

What is even more interesting is that there was a slight decline in assets during the second quarter and there are obvious outflows at some UCITS bond fund managers.

As we reported earlier this week, there have been outflows into ILS funds generally around the middle of the year and it appears that these have also spread to some bond fund strategies. cat.

As always, however, it is not entirely clear how managers are affected by changes in the AUMs of their UCITS cat bond funds, as we understand that some have seen investors switch to other strategies before mid-year, either closed-end CAT bond funds or funds with a broader NIT instrument mandate.

In terms of the leading cat UCITS bond funds, the strongest growth in the first half can be seen in Twelve Capital’s strategy, the Twelve Cat Bond Fund, which has so far grown almost 15% from to 2022 to reach over $1.9 billion.

The GAM Star Cat Bond fund, managed by Fermat Capital, remains the largest UCITS cat bond strategy, with over $2.6 billion in assets, having gained 5% in the first half.

The Schroder GAIA Cat Bond Fund, on the other hand, has lost 5% this year, but still has nearly $2.3 billion of cat bond assets in the strategy.

In the first half of 2022, the Plenum Investments Cat Bond Dynamic Fund recorded the fastest growth of 63%, while the Tenax ILS UCITS Fund, managed by London-based hedge fund manager Tenax Capital, recorded the second fastest growing by percentage, adding 59%.

Thus, it is clear that these cat UCITS bond funds have almost all increased their assets through late 2020 and early 2021, resulting in a capacity glut which has led to some easing in rates. cat cat bonds last year.

But now that the glut of excess cat bond fund capacity has been absorbed and deployed, while inflows have been more measured lately, the way mutual fund assets have stabilized in the first half, while that issues continued to outrun maturities, goes a long way toward explaining the spread effects seen in the cat bond market.

Going forward, with the pipeline expected to remain busy for new catastrophe bonds later this year, there should be opportunities for UCITS catastrophe bond fund managers to deploy more assets and so we could see the admissions increase in the second half of 2022.

Analyze the growth of UCITS catastrophe bond fund assets using our charts here.

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