Plenum grows European Insurance Bond Fund to more than €100m

Plenum Investments AG, the Zurich based specialist insurance-linked securities (ILS) and catastrophe bond investment manager, has experienced growth in assets raised for its Plenum European Insurance Bond Fund, a UCITS investment strategy focused on the debt issuances of European insurers.

Plenum launched the European Insurance Bond Fund in 2021 with over €20 million of assets, as a UCITS fund strategy that offers daily liquidity to investors and exclusively invests in subordinated bonds issued by European insurance and reinsurance companies.

The investment manager aims to extract sector-specific extra premium and capitalise on market inefficiencies it sees in the area of European subordinated bond segment, with the mandate also allowing investments into Restricted Tier 1 instruments (RT1), which are another instrument used in the European subordinated insurance and reinsurance bond market.

Plenum notes that the fund has a strong focus on these Restricted Tier 1 instruments (RT1), given they typically yield around 200 basis points above Tier 2 bonds of the same issuers.

Now with more than €100 million of assets under management, the strategy has become a meaningful component of Plenum’s growing cat bond, ILS and reinsurance focused investing platform.

Rötger Franz, Lead Portfolio Manager of the fund, commented, “In contrast to banks, insurance companies are not exposed to a bank-type run-risk. This gives companies more time to react and their tool box to address any problems is well established and effective. All of this points to the relative attractiveness of insurance companies over banks.”

Daniel Grieger, CIO at Plenum and also a Portfolio Manager of the fund, added, “Typical financial credit funds are heavily overweight to banks, AT1 bonds in particular, with only marginal positions in the insurance sector. This fund is the ideal addition to any portfolio that holds such a bank-heavy fund. Even investors who usually underweight financials should look at this niche-asset class.”

The investment manager believes that in-depth fundamental analysis, a focused approach and entering into regular exchanges with decision makers of the issuers are a key component of the Plenum strategy to capitalise on the dynamics of the insurance industry.

“Defaults of insurance companies are extremely rare – since the introduction of Solvency II back in 2016 there has been not a single default in our investment universe. All of this results in very reliable cash flows investors can benefit from,” Franz explained.

Plenum sees its European Insurance Bond Fund as well-suited to investors looking to “strengthen the resilience of their portfolios in the High Yield segment,” also saying that it can “improve the risk return ratio in the segment of bonds with a current average BBB rating.”

In addition, Plenum noted that the European Insurance Bond Fund’s performance currently exceeds 10% year-to-date in all EUR hedged share classes.