Private ILS funds that invest in collateralized reinsurance instruments other than catastrophe bonds are now accelerating their returns for 2023 compared to the market’s group of pure cat bond funds. Eurekahedge ILS Advisors Index after the September results.
Through the end of August, catastrophe bond funds purely tracked by the index saw their 2023 returns exceed those of the ILS private fund cohort, despite the evidence of strong seasonal returns from guaranteed reinsurance instruments.
But after another strong September for the ILS private fund cohort, they are now ahead of the year.
ILS advisors explained that in September, “private ILS captures the seasonality effect” as no significant catastrophic losses have occurred to detract from performance.
For the month of September 2023, the average return of ILS funds tracked by the index was 1.23%, marking the best September performance for the index since 2019.
This represents the cumulative performance of the year for the whole Eurekahedge ILS Advisors Index at 10.75% for the first nine months of this year.
This makes 2023 the second strongest year on record for the index, reflecting the significantly improved returns available in insurance-linked securities (ILS) and catastrophe bonds.
In September, pure catastrophe bond funds rose 1% as a group, but benefiting from seasonality, private ILS funds rose 1.42% as a group.
Aggregating the monthly returns of each group, pure cat bond funds are now up 10.15% at the end of September, while private ILS funds are up 10.33% at the end of September.
October should see another month of strong 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. This group of ILS funds could therefore increase its lead when the next index report is published. available.
ILS Advisers said 25 ILS funds represented in the Eurekahedge ILS Advisers Index were positive for September 2023, while 2 were negative.
Overall, the performance gap was wide for the month, with the worst performing ILS fund returning a negative -1.53% and the best performing a very positive return of 4.31% for September.
You can follow the Eurekahedge ILS Advisor Index here on Artemis, including the USD hedged version of the index. It includes an equally weighted index of 27 insurance-linked investment funds that track their performance and is the first benchmark to enable comparison between different insurance-linked securities fund managers in the ILS investment space , linked to reinsurance and catastrophe bonds.