The SIF Core Insurance Linked Securities fund invests in insurance linked securities – mainly linked to natural catastrophes such as hurricanes and earthquakes but also, to a lesser extent, man-made risks in the aviation and offshore energy industries.
The fund is targeted at institutional investors such as pension funds, sovereign wealth funds and family offices.
The fund’s launch follows the global asset manager’s June acquisition of a 30% stake in Secquaero Advisors, a Swiss-based insurance-linked securities and reinsurance investment manager.
The SIF is managed by Daniel Ineichen, and will be supported by a 16-strong specialised ILS team across Schroders and Secquaero Advisors.
Schroders and other asset managers operating in this space – such as GAM, which launched similar product in November 2011, – maintain that returns from catastrophe bonds are largely uncorrelated with macroeconomic factors, which allows them to bring valuable diversification attributes to portfolios of more traditional asset classes.
An ILS fund holds particular appeal in uncertain financial climates when investors may wish to protect themselves from market forces, said Schroders. In 2008, for example, Schroders analysts noted that catastrophe bonds were one of the few asset classes which provided positive returns over the course of that year.
According to Ineichen, the fund’s ability to access a wider universe of non-life insurance risks would provide investors with the opportunity to diversify and broaden their asset portfolio.
He added: “ILS has a low correlation with other asset classes, such as equities, bonds, real estate or the business cycle. A diversified portfolio of ILS provides attractive risk-return characteristics and excellent diversification benefits, both within a fixed income portfolio and within a broader multi-asset portfolio."
