Amundi Pioneer fund ILS asset value was catching up to costs by July 31st

The value of insurance-linked securities (ILS) held in the dedicated mutual ILS investment fund operated by Amundi US Investment Management, the Pioneer ILS Interval Fund, almost caught up with their cost in the last quarter of record.

At the end of January reporting, the valuation of the ILS instruments held in the fund portfolio was around $33 million short of their cost.

That gap had narrowed by the end of April 2022, when the gap between value and cost of the ILS assets had narrowed to $20 million.

By the end of July, the latest reporting on this mutual ILS fund from Amundi US Investment Management, the gap had narrowed further, falling to less than $4 million.

At July 31st 2022, the ILS securities held by the interval style mutual fund were valued at $843.6 million, a little down on the $873.5 million reported at April 30th 2022, but still up on the $835.7 million reported at January 31st 2022.

But the cost of those ILS securities was reported to be $847.2 million at July 31st, so with only a small gap between cost and value now.

As the Pioneer ILS Interval Fund portfolio has been renewed and legacy, or loss hit positions roll-off, the portfolio managers have worked hard to improve the terms on the arrangements they invest in, while rates have been rising.

This had clearly been refreshing the portfolio and resulting in the gap between cost and valuation of the ILS positions narrowing over time.

It’s important to note, while some marked-down positions drag the valuation of the portfolio down a little still, the overwhelming majority were booked above cost in the latest portfolio disclosure, which was as of the end of July 2022.

Of course, now this fund has hurricane Ian to contend with, like the rest of the ILS and reinsurance fund management industry, so it will be interesting to see how this gap widens again at the next reporting of the portfolio, which will be later this quarter.

The Amundi US managed ILS investment fund also ended the last reported quarter with a little more invested in short-term assets, suggesting the fund had some additional fire-power remaining after the mid-year renewals, likely another sign of the portfolio managers becoming increasingly selective and managing their risks carefully.

The mutual ILS fund remains largely exposed to sidecars and private reinsurance or retrocession quota shares, with just over 60% of net assets invested in that category of ILS assets.

Catastrophe bonds made up 17.7% of net assets at July 31st, as too did collateralized reinsurance deals and industry loss warranties (ILW’s) just 2%.

The overwhelming majority of the fund’s allocations are to worldwide multi-peril sidecars, which could help to insulate its exposure to hurricane Ian a little, as these deals are not US or Florida specific and sometimes can be underweight Florida.

At this stage, now over two weeks since hurricane Ian, the Pioneer ILS Interval Fund is down just over -5% since the storm made landfall.

The true impact of the storm to the ILS fund will be clearer when the next quarterly period of performance is reported.