Private ILS funds overtake cat bonds in ILS Advisers Index after September

Private ILS funds that allocate to collateralised reinsurance instruments other than catastrophe bonds, are now accelerating their 2023 returns over the group of pure cat bond funds in the Eurekahedge ILS Advisers Index after September’s results.

Up to the end of August, the pure catastrophe bond funds tracked by the Index saw their 2023 returns running ahead of the private ILS fund cohort, despite the evidence of strong seasonal returns emerging from collateralised reinsurance instruments.

But, after another strong month in September for the private ILS fund cohort, they are now running ahead year-to-date.

ILS Advisers explained that, in September, “Private ILS capture the seasonality effect,” as no meaningful catastrophe losses occurred to dent performance.

For the month of September 2023, the average return of ILS funds tracked by the Index was 1.23%, which is the strongest September performance for the Index since 2019.

This took the year-to-date performance for the entire Eurekahedge ILS Advisers Index to 10.75% for the first nine months of this year.

That makes 2023 now the second strongest year on record for the Index, reflecting the greatly improved returns available in insurance-linked securities (ILS) and catastrophe bonds.

In September, pure catastrophe bond funds were up by 1% as a group, but benefitting from seasonality the private ILS funds rose by 1.42% as a group.

Aggregating the monthly returns of each group, the pure cat bonds funds are now up by 10.15% to the end of September, while the private ILS funds are up by 10.33%, to the end of September.

October should see another strong month of returns for the group of private ILS funds that invest in reinsurance and retrocession arrangements, given the strong seasonality they typically expect for the month, so this group of ILS funds may stretch their lead when the next Index report is available.

ILS Advisers said that 25 ILS funds represented in the Eurekahedge ILS Advisers Index were positive for the month of September 2023, while 2 were negative.

Overall, the performance gap was wide for the month, with the worst performing ILS fund reporting a -1.53% negative return and the best performing a very positive 4.31% for September.

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 27 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.