The Dynamic Cat Bond Fund is a dedicated cat bond strategy that targets a risk level similar to the broader cat bond market by investing in a diversified portfolio of natural catastrophe risks in developed markets. The fund’s returns are based on the potential occurrence of peak insurance events such as hurricanes or earthquakes, with risks spread primarily across the US, Europe, Japan and Australia. At the end of 2023, six months since its inception, it delivered a return of close to 6% in the AUD hedged share class, net of management fee and cost.

The fund is classified as an Article 8 fund under the Sustainable Finance Disclosure Regulation (SFDR), meaning that it promotes environmental, social and other ESG characteristics. It is available for distribution to qualified or wholesale investors and offers biweekly liquidity in line with UCITS liquidity standards. The fund was launched with an initial investment from an Australian-based institutional investor, with a pipeline of additional Australian investors expected to follow in the coming months.

Michael Stahel, a Partner at LGT Capital Partners, commented: “2023 has been an exceptionally good year for ILS investors, and we are pleased with the performance of the Dynamic Cat Bond Fund in Australia in the first half year since its launch. The fund complements our existing suite of strategies. With increasing pressure on primary insurance companies to meet regulatory capital requirements, we continue to see a strong deal flow in the primary cat bond market at very attractive yield levels.”

Nathan Pensabene, Head of Sales Australia at LGT Capital Partners, added: “After a challenging 2022 for traditional investments, and with the outlook for the broader financial markets remaining uncertain, we saw increased interest in liquid investment strategies with the potential to provide real diversification during 2023. ILS are an interesting asset class for investors as they are liquid, have limited correlation to other asset classes and benefit from higher cash rates. Our ILS team is one of the most experienced in the market, as it started investing in the asset class back in 2005. We are pleased to be able to offer this new fund to our Australian clients.”

ILS is one of LGT Capital Partners’ diversifying strategies. The team consists of 27 professionals based in Zurich and Bermuda and it manages well over USD 3 billion in capacity across its open-ended investment funds and bespoke mandate solutions. They invest in all types of ILS investments such as cat bonds and collateralised reinsurance investments.