Australian investment distribution house, Bennelong Funds Management, has opened up a new catastrophe bond option for institutional and wholesale investors on both sides of the Tasman.
The cat bond product roll-out follows a deal inked with, Leadenhall Capital Partners, last October to distribute strategies offered by the insurance-linked investment specialist in the Australasian market.
Founded in 2008, Leadenhall is a well-known brand in the relatively young global insurance-linked securities (ILS) asset class with some presence already here after landing a $275 million mandate with the NZ Superannuation Fund in 2013.
Cat bonds offer investors high-yielding returns in exchange for taking on insurance risk related to major natural disasters – most commonly cover for hurricane damage in the US.
The underlying securities and risks can be complex to manage, however, with a niche group of investment firms operating in the space who deal mainly with sophisticated institutions.
In a statement, Lorenzo Volpi, Leadenhall managing partner, said the agreement with Bennelong “has allowed us to introduce a product that not only diversifies portfolios but also brings innovative investment opportunities to Australia and New Zealand”.
The cat bond market had been in the doldrums for several years until 2023 when the index return for the sector surged to almost 20 per cent.
According to ILS-focused publication, Artemis, cat bonds eased back somewhat over 2024 to the end of July but delivered a “still historically very high” yield of more than 13.5 per cent.
The year to end of July saw “the catastrophe bond market yield on more of a roller coaster than normal, with spread tightening to begin the year, which drove cat bond spreads and yields down, which was followed by a period of relatively significant spread widening that drove the market yield back up again”, the Artemis article notes.
Elsewhere the publication says the Bennelong-Leadenhall Australasian launch “timing could be opportune”.
“… there has been increased interest in ILS among large investors in Australia and New Zealand of late, with flows into insurance-linked securities (ILS) strategies from the region having increased and investors there highlighting their desire to allocate to ILS fund strategies of late,” Artemis says.
Bennelong represents seven boutique managers including 4D Infrastructure, Quay Global Investors, Canopy Investors and Skerryvore Asset Management.
The Scottish firm Skerryvore landed an emerging markets mandate with the Tauranga charitable fund, TECT, earlier this year under the advice of new Australia-based consultant, Frontier.