Rational Funds launches ILS fund with mutual focus


New York-based mutual fund firm Rational Funds aims to bring the benefits of insurance-linked securities (ILS) to the mutual fund market with the launch of Context Insurance Linked Income Fund (ILSIX).

ILSIX invests primarily in income-producing, insurance-related investments and yield-oriented insurance securities to achieve the objective of total return.

It will focus its investments on catastrophe bonds and insurance-related investments, for example event-linked bonds, event-linked swaps, corporate debt and preferred stock issued by insurance or reinsurance companies.

Cat bond returns are tied to a single or multiple insurance events, and are designed to replicate the function of a reinsurance agreement, the firm explained.

“The Context Insurance Linked Income Fund brings the benefits of insurance-linked securities (ILS) to the mutual fund market with a strategy offering unlike any currently available to all investors,” said Jerry Szilagyi, CEO of Rational Funds. “The launch of ILSIX is part of our continued commitment at Rational Funds to sponsor rationally-driven, disciplined and systematic investment approaches.”

ILSIX plans to invest 80 percent of its assets in insurance-related investments, under normal circumstances.

The portfolio managers for ILSIX are Pete Vloedman and Andrew Sterge, who have over 45 years of reinsurance and ILS experience across both the US and Bermuda markets.

Vloedman is a managing member at Atterbury Associates, where he advises reinsurance clients on areas such as enterprise risk management, ILS and insurtech. Prior to that he served as chief underwriting officer of GeoVera Insurance/Redmond Capital Management.

Sterge is currently executive at alternative investment firm Context Capital Partners, and was formerly chairman at Bermuda-based AQR Re.

“Compared to other non-traditional fixed income products, our strategy will aim to provide returns that are minimally correlated to interest rates and bond and equity markets, while providing investors access to an asset class currently dominated by large institutions and hedge funds,” said Sterge.

Bermuda's share of the global alternative capital market is around 58 percent, or $51.9 billion, at the end of 2017, according to the Bermuda Monetary Authority's Alternative Capital Report 2018.

Rational Funds, ILS, Investment, Mutual, North America

Bermuda Re