Plenum Insurance Capital Fund Exceeds $400m in Assets

Plenum Investments AG, a specialist insurance-linked securities (ILS) and catastrophe bond investment manager located in Zurich, has increased the assets under management of its mixed catastrophe bond and subordinated insurance debt ILS investment fund to more than $400 million.

In June 2020, the Plenum Insurance Capital Fund, a UCITS ILS fund that invests in both catastrophe risks and subordinated insurance debt instruments, was established.

Plenum saw strong uptake for the new strategy, having previously been better known for its relatively low-risk catastrophe bond fund, which has more than a decade of track record behind it, and the Insurance Capital Fund reached $100 million in assets within nine months, then $150 million after its first year.

Plenum’s Insurance Capital Fund aims to manage high-yield insurance risks more efficiently, employing a strategy known as “tail-to-tier.”

It aims to achieve this by reducing the concentration risk in US wind exposures that is typical of cat bonds and other ILS or collateralized reinsurance investment strategies, while aiming for a more even return profile when compared to more seasonal US wind-focused cat bonds and private ILS strategies.

The fund primarily invests in cat bonds and aims to manage insurance risks more efficiently than traditional CAT bond funds.

Reaching $400 million in assets in just over three years has contributed significantly to Plenum’s firm-wide AUM growth. According to Artemis’ ILS fund manager directory, this had surpassed $1 billion by the midpoint of this year.

“The Plenum Insurance Capital Fund has been well received by the market as our approach offers investors a new way to achieve attractive returns in the CAT bond market with reduced tail risk.” Daniel Grieger, Lead Portfolio Manager of the fund and CIO of Plenum Investments Ltd. explained.

“We also take advantage of the unique relative valuation of the two asset classes of CAT bonds and insurance bonds in order to actively manage the seasonality of US hurricane risks.”

Dirk Schmelzer, who manages the cat bond allocation, added, “The capital employed is more efficiently deployed as we actively reduce hurricane positions after the hurricane season. This active approach means that our tail-to-tier investment approach currently has a capacity limit of USD 1 billion.”

Rötger Franz, who is responsible for managing the portfolio of subordinated insurance bonds, also said, “In many respects, subordinated bonds of European insurers are complementary to CAT bonds. The subordinated debt issuers have usually manageable natural catastrophe exposures in the USA. Just like CAT bonds, subordinated insurance bonds enable insurers to write more business, but unlike CAT bonds, there is no direct catastrophe risk transfer to the capital market.”

Plenum Investments observes that, as default rates on high-yield bonds rise, investors are turning to instruments such as catastrophe bonds and what the manager sees as attractive corporate bonds with the lowest default rates as an investment alternative, in the spirit of “high yielding but not high yield.”

By the end of October 2023, the Plenum Insurance Capital Fund had returned 11.11% to investors in USD, rising to 12.44% by November 17th, with a 12-month return of 16.59%.


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