PGGM / PFZW ILS portfolio returns 11.7% to end of Q3. AUM around US $8.6bn

The broadly diversified portfolio of insurance-linked securities (ILS) and reinsurance investments managed by pension investment firm PGGM on behalf of end-client the Dutch pension PFZW, delivered a 5.8% return for the third-quarter, lifting year-to-date returns to 11.7%.

At the same time, the latest assets under management of what is the largest single investor ILS allocation in the market ended September at around the US $8.6 billion level.

In Euros, the insurance portfolio managed by PGGM for PFZW stood at €7.685 billion at September 30th, which is just very slightly down on the June 30th reported figure of EUR 7.693 billion.

Returns were strong in the third-quarter, with the 5.80% performance of the PGGM / PFZW portfolio of catastrophe bonds, insurance-linked securities (ILS) and other reinsurance investments beating the 5.5% return that had been reported for the first-half of this year.

Which takes the ILS portfolio return for the year to end of September 2024 to 11.7%.

It’s worth noting that the target return for the ILS portfolio is 4% above the risk-free rate, which in 2024 is once again being well exceeded.

For comparison, the return performance of the ILS portfolio through the first three-quarters of 2023 was 11.80%, while for 2022 it was -3.1%, and 2021 -1.5%.

At the size reported at the end of September, the ILS portfolio managed by PGGM for its pension fund client PFZW made up 3% of its total net invested assets, which stood at €254.6 billion, up from €240.5 billion at the mid-year.

The ILS portfolio accounted for 3.2% of PFZW’s net assets at the end of the first-half, so it has slipped slightly below the target, which was set at 3.2% as of the mid-year point, even while the overall assets of the client pension PFZW have been growing. It’s important to note that currency effects can make a relatively significant difference there and the ILS portfolio has been relatively stable, albeit with some changes to allocation mix.

As we reported yesterday, a new reinsurance investment partner has been added, with a $200 million allocation to Scenery Re Ltd., a quota share structure managed by Everest unit Mt. Logan Capital Management.

We assume that it might be included in the latest end of Q3 figures, which would still give PGGM and PFZW a little more headroom to expand the ILS portfolio back up to the 3.2% of assets target.

As we also reported this week, the target allocation range has been raised for the portfolios allocation to the Munich Re reinsurance sidecar vehicle Leo Re, so that is a potential area of future expansion.

PGGM remains the largest single investor listed in our directory of pension funds and sovereign wealth funds investing in ILS and reinsurance.