ILS fund index delivers highest first-half return on record: ILS Advisers

Pure catastrophe bond funds as a group were up an impressive 7.17% for the first-half of 2023, narrowly beating the 6.91% average return of the private ILS funds that invest in collateralised reinsurance and retrocession opportunities as well, the latest data from ILS Advisers shows.

In fact, the half-year return for the Eurekahedge ILS Advisors Index has now reached a record level, at 6.99%, which beats the previous high from back in 2007.

Already, 2023 sees this ILS fund Index return at its highest level for any full-year since 2013, which really drives home how attractive the investment opportunity in catastrophe bonds and private ILS is at this time.

The strong performance of catastrophe bonds has been a significant driver this year, after pure cat bond funds outpaced the private ILS funds for most of the year so far.

Now, with seasonal returns coming into play from the US hurricane season as it nears its peak, we’d expect the private ILS funds to catch up, as collateralised reinsurance and retrocession returns get their chance to shine and we could see the private ILS figure jumping over the next few months as a result.

For June 2023, the average return of ILS funds as measured by the Eurekahedge ILS Advisors Index reached 1.33%.

In June, pure cat bond funds as a group were up +1.32%, while the funds whose strategies include private ILS outperformed gaining +1.39% for the month.

Every ILS fund represented in the Eurekahedge ILS Advisers Index delivered positive performance for June 2023, with the range of returns spreading from +0.24% to +2.54%.

For the first-half, every single constituent fund in the Eurekahedge ILS Advisers Index was positive.

Cat bond funds rose 7.17% on average for the first-half of 2023, slightly outperforming private ILS funds which increased by 6.91%.

ILS Advisers explained that, “Cat bonds funds benefited quicker from the mark-to-market rebound in prices so far this year. Private ILS funds tend to value more positions based on seasonality-adjusted models.

“Those positions are expected to pickup more as we enter the core of the wind season in the August to October period.”

You can track the Eurekahedge ILS Advisers Index here on Artemis, including the USD hedged version of the index. It comprises an equally weighted index of 26 constituent insurance-linked investment funds which tracks their performance and is the first benchmark that allows a comparison between different insurance-linked securities fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.