Bermuda-based Mercury Capital has opened the doors to its index-tracking cat investment fund—the first of its kind.
The fund tracks the Mercury investible Catastrophe Risk Index (MiCRIX), offering clients the opportunity to “access the low correlation, high yield returns” associated with a cat bond portfolio, but “without the idiosyncratic exposure of individual risk selection”.
The fund tracks the performance of a diversified portfolio of ILWs in the market and Mercury Capital has said that the return across the portfolio – which has averaged 9.1 percent since its inception in January 2006 – will be sufficient to absorb a single tower of exposure.
Returns from the fund are expected to be in the high single digits.
The tracker fund will likely prove attractive to institutional investors looking to strengthen investment returns in the current troubled investment environment. And it seems that rising institutional interest may well have been behind Mercury Capital’s decision to open its doors to external investors increasingly comfortable with cat risk. That the fund is index-based will undoubtedly help to dispel some of the mystique some investors associate with reinsurance and cat risk.