Sector developments and company hires

Plenum Investments has released a catastrophe bond market study and index family, with the aim of providing investors with what the firm describes as an “investment compass”. Plenum believes that the index will enable a fund offering to be matched with the individual risk appetite of an investor, while allowing the performance and risks of funds to be compared with each other.

“The index is intended to set a benchmark standard in the cat bond fund industry. The study also shows how fund managers deal with the challenges of the cat bond market and includes all cat bond funds that comply with the UCITS guidelines and invest directly and exclusively in cat bonds,” the firm states.

The index family comprises 12 indices reflecting the returns of all 14 cat bond funds available in UCITS format, representing US$8.8bn in AUM (or a 23% market share of the collateralised natural catastrophe business). The indices are calculated on an average and capital-weighted basis and are further divided into two risk categories for the average-weighted calculation.

They are investable total return fund indices, which are calculated and published on a weekly basis. The reference currencies of the indices are US dollar, Euro and Swiss franc.

Meanwhile, according to Plenum, the market study creates comparability between cat bond funds for the first time by calculating their risks using a uniform risk ratio model. “This market survey makes cat bond funds comparable for the first time by using the same risk model for all funds. We show that there are significant differences between the funds, in terms of risk diversification as well as exposures, and that certain funds carry (tail) risks above average compared to their expected returns,” comments Dirk Schmelzer, managing partner and fund manager at the firm.

Since 2010, UCITS cat bond funds have become a major pillar of the capital markets-based transfer of reinsurance risk. The strong growth and rising numbers of cat bond funds, the increasing heterogeneity of funds, the different risk models and the lack of a risk presentation standard remain challenging for investors.

In other news…

EMEA

Propel Finance has announced the completion of its first private securitisation as a part of its latest £500m financing round. The UK-based asset manager was supported by strategic advisers Blake Morgan (legal) and EY (corporate finance) in its inaugural transaction. The latest funding round follows several initial funding rounds with the British Business Bank and marks the latest stage in Propel’s strategy to expand and diversify its funding base to boost continued development and support for UK SMEs. The partial refinancing of Propel’s existing British Business Bank ENABLE Funding facility was supported by Citi, which structured a £275m private securitisation facility, and Quilam Capital, which provided a further £35m mezzanine and working capital facility. British Business Bank will continue to support Propel as a funding partner, with the ENABLE Funding facility allowing the firm to offer £165m of finance to SMEs across the UK.