Plenum Investments, the Zurich-based specialist asset manager, has seen its two catastrophe bond funds generate record returns so far this year, despite significant de-risking undertaken over the past twelve months.
Plenum Investments reduced the expected loss of catalytic bond fund portfolios, as well as the 99th percentile value at risk for each.
The result has been catalytic bond fund portfolios that have lower risk compared to their previous iterations, even though they have much higher return potential given improving spreads and rate yields without risk available.
The Plenum CAT Bond Fund, which is the investment manager’s long-standing catalytic bond fund strategy that has a track record of nearly a decade, delivered an impressive 11.95% performance through the last week of October, a return of 7% above the money market return and 3% above the objective.
Since this catalytic bond fund is designed to be one of the most conservative available, it clearly reflects the very high yields of the catalytic bonds available and the contribution of collateral returns to the performance of the catalytic bond fund.
Regarding the risk level of the Plenum CAT Bond Fund, the asset manager reduced the fund’s expected portfolio loss by more than 15%, while the VaR at the 99th percentile fell by more than 12%, all over of the last year.
Plenum’s other catalytic bond fund, the Plenum CAT Bond Dynamic Fund, follows a higher risk and reward strategy in the catalytic bond sector, providing a differentiated offering to Plenum’s flagship catalytic bond strategy .
Launched in 2021, the Dynamic high-yield catastrophe bond fund strategy is also seeing record returns since the start of the year, with a performance of 13.7% until the last days of October.
It is now performing 9% above the guarantee return and 3% above the target of the Dynamic catalytic bond fund.
In 2023, Plenum once again took the opportunity to de-risk the Dynamic CAT Bond Fund, with the portfolio’s expected loss falling by 30.5% over the past twelve months, which also saw the VaR at 99th percentile drop by almost 25%. .
Despite this significant reduction in the level of risk, the Plenum Dynamic CAT Bond Fund offers its investors very solid returns, reflecting the way in which ILS managers like Plenum have been able to adapt to the difficult market environment, to truly maximize returns. returns while reducing risk for investors. .
Looking ahead to 2024, Plenum Investments expects performance to remain strong for its two cat bond fund strategies, with the low volatility Plenum CAT Bond Fund strategy targeting a 10% return for 2024 in USD, while the Higher yielding Plenum Dynamic CAT Bond Fund strategy is expected to be at least 10%, with possible returns of 13% or more.
Plenum noted, however, that it would re-evaluate the risk of the Dynamic CAT Bond Fund strategy a bit, in order to take advantage of market issuance and ensure its portfolio is well-constructed for next year.