Cat Bond ETF Market Updates and Trends

The cat bond ETF market has seen significant growth in recent years, with issuances reaching a record high in 2020. This growth is attributed to the increasing demand for alternative risk management solutions.

Cat bonds have been used to cover a wide range of natural disasters, including hurricanes, earthquakes, and wildfires. The first cat bond was issued in 1996 to cover hurricane risk in the Caribbean.

The cat bond ETF market has become more accessible to investors, with several ETFs offering exposure to the asset class. The iPath Series B S&P 500 VIX Short-Term Futures ETN, for example, allows investors to gain exposure to the VIX, a measure of market volatility.

Cat bonds have been used to cover a wide range of natural disasters, including hurricanes, earthquakes, and wildfires.

Brookmont Capital Management is launching the first-ever Catastrophic Bond ETF in the United States, trading under the ticker symbol 'ROAR', and listed on the New York Stock Exchange (NYSE).

The ETF aims to invest close to 80% of its net assets in catastrophe bonds, generating income through interest payments from these bonds while preserving capital by carefully selecting bonds and other insurance-linked securities (ILS).

The ROAR ETF will provide retail investors with access to 'event risk' catastrophe bonds, primarily associated with hurricane risks in Florida, which leverages the higher availability and market proportion of these investments compared to other perils.

Retail investors will have access to answers and sentiment reflected in the price of the ROAR ETF, which adjusts upward in line with increases in short-term rates, typically resulting from inflation.

In the latest cat bond deals, several issuers have made significant moves. Veraison Re 2025-1 issued $275m in funding.

One notable deal is the Vitality Re XVI, which raised $250m. Montoya Re 2025-1 also made a significant impact with its $100m issuance.

Twelve Securis has been established with $8.5 billion of assets under management (AUM), making the newly branded and combined ILS manager one of the largest in the sector.

The merger of Twelve Capital and Securis Investment Partners has now completed, creating one of the largest ILS managers in the industry.

This significant milestone demonstrates the growing demand for innovative financial solutions, with Twelve Securis poised to lead the way.

The newly formed company has a substantial asset base, with $8.5 billion in AUM, a testament to the success of the merger.

Twelve Capital has launched its first parametric ILS fund, marking a significant milestone in the industry.

This fund is a result of collaboration between Twelve Capital and its partners, including Descartes Underwriting and Generali's Global Corporate & Commercial arm, which will handle origination.

Twelve Capital is a Zurich-headquartered insurance-linked securities (ILS) and reinsurance investment manager.

Brookmont is launching a Cat Bond ETF now because it will offer retail investors access to catastrophe bonds, which are typically only available to institutional investors. This is a significant opportunity for individual investors to diversify their portfolios.

The S&P 500 has been up 17.73% year-to-date, and markets are pricing in a Federal Reserve rate cut in September, making this a good time to launch a Cat Bond ETF.

The ROAR ETF will focus on hurricane risks in Florida, which are more prevalent and widely available compared to other perils. This is a smart move, as it allows the ETF to tap into a larger market.

Cat Bonds have a unique feature: they adjust their interest rates monthly, providing returns based on a one-month T-bill rate plus a spread. This means they'll increase in value as short-term rates rise, typically due to inflation.

For investors looking to hedge their portfolios against natural disasters, the ROAR ETF is worth monitoring. It's not every day you get to invest in hurricanes without getting wet!

The GAM Star Cat Bond Class Institutional EUR Income Hedged fund has shown impressive performance over the years, with a 10-year return of +41.25% and an average annual return of 3.51%.

In terms of annual performance, the fund has fluctuated between +13.47% in 2024 and -4.26% in 2022. This highlights the potential for significant growth, but also the importance of managing risk.

Over the past 5 years, the fund has delivered an average annual return of 5.52%, which is a respectable figure for a cat bond ETF.

Catastrophe bond fund strategies in the UCITS format averaged positive returns for the month of January 2025.

The Plenum CAT Bond UCITS Fund Indices reported that the overall yield of the catastrophe bond market ended the month back in double-digit territory, at 10.34% in USD.

Price adjustments to catastrophe bonds exposed to the California wildfires drove the yield higher in January 2025.

The positive returns for UCITS funds in January 2025 is a notable achievement, considering the challenges posed by the wildfires.

The minimal effect of the wildfires on the Plenum CAT Bond UCITS Fund Indices is also a positive sign for investors.

The reduced gains made by catastrophe bond funds due to the write-downs in value of exposed positions resulted in a very slight decline for the Index representing the lower-risk cohort of catastrophe bond funds.

The Brookmont Catastrophic Bond ETF is nearing its launch, and we've got the inside scoop on its liquidity. Brookmont Capital Management's Principal & Chief Investment Officer, Ethan Powell, and King Ridge Capital Advisors' co-founder, Rick Pagnani, shared their thoughts on the strategy.

Brookmont Capital Management is the advisor to the Brookmont Catastrophic Bond ETF. Artemis spoke with Ethan Powell to learn more about the strategy and its development.

The awaited launch of the Brookmont Catastrophic Bond ETF is nearing, and Artemis caught up with Ethan Powell and Rick Pagnani to discuss their thoughts on its liquidity.

Risk models pose challenges to expected loss cat bond fund comparisons.

A new study by Plenum Investments has revealed that a lower expected loss of a portfolio should not always be considered a key indicator of a fund's level of risk.

This is because Plenum Investments found that risk models can be complex and don't always provide a clear picture of a fund's risk level.

In fact, a lower expected loss doesn't necessarily mean a fund is less risky, as Plenum Investments' study suggests.

A specialist manager of catastrophe bond and insurance-linked securities (ILS) funds, Plenum Investments, conducted the study and found that risk models can be misleading.

Their study highlights the importance of considering multiple factors when evaluating fund performance, rather than just relying on expected loss.

The performance of the GAM Star Fund plc - GAM Star Cat Bond Class Institutional EUR Income Hedged has been impressive over the long term, with a 10-year return of +41.25%. This is a significant achievement, especially considering the fund's 3.51% average annual return over the same period.

Over the past 5 years, the fund has delivered a return of +30.80%, with an average annual return of 5.52%. This is a testament to the fund's consistent performance and ability to generate returns for investors.

The fund's 3-year return is also noteworthy, with a gain of +22.95% and an average annual return of 7.13%. This demonstrates the fund's resilience and ability to navigate market fluctuations.

Here's a breakdown of the fund's performance over different time periods:

The fund's performance over the past year has been a bit mixed, with a return of -0.70% in the current year and +13.47% in 2024. However, the fund's long-term track record remains strong, making it an attractive option for investors looking for a consistent and stable return.

In our analysis of fund performance, we rely on two key benchmarks to gauge the risk and return of our investments.

The primary benchmark for the riskier portion of our portfolio is the FTSE WGBI/Eureka ILS Adv Spli hdg TR EUR.

We also use the USTREAS T-Bill Auction Ave 3 Mon as the benchmark for the risk-averse portion of our portfolio.

Data is provided by Morningstar for equities, ETFs, and funds, CoinGecko for cryptocurrencies, and the Isarvest GmbH.

Kursdaten are at least 15 Minuten zeitverzögerte Börsenkurse for equities, ETFs, and funds, or NAV-Kurse for ETFs and funds.

Realtime-Kurse are available from the providers and Lang & Schwarz for equities, ETFs, and funds, and CoinGecko for cryptocurrencies.

The Isarvest GmbH cannot guarantee the accuracy and completeness of the information presented.

The Fund is designed to generate returns and growth by investing in catastrophe bonds, also known as cat bonds, which transfer the risk of financial loss from catastrophic events to the capital markets.

Cat bonds are a unique investment opportunity that allows investors to participate in the risk management of catastrophic events, such as natural disasters.

The Fund aims to provide a way for investors to diversify their portfolios and potentially earn returns through this alternative investment strategy.

The Fund Details section is where things get interesting. This Fund is focused on investing in catastrophe bonds, also known as cat bonds.

Cat bonds are a type of insurance linked security that transfers the risk of financial loss due to catastrophic events to the capital markets.

In simpler terms, this means the Fund is looking to generate returns and growth by taking on this specific type of risk.

The Fund specifically targets the ILS - Catastrophe bonds type, which is a clear indication of its investment focus.

Insurance Linked Securities (ILS) is the broader category that cat bonds fall under, and it's a specialized area of finance.

The investment manager has celebrated two significant milestones, marking the anniversaries of its dedicated insurance-linked securities (ILS) and catastrophe bond fund strategies.

The Pioneer CAT Bond Fund and the Pioneer ILS Interval Fund have collectively reached a significant milestone, surpassing $1.35 billion in assets under management (AUM).

These funds have been successful in attracting investors and growing their assets, a testament to the strength of Amundi US's investment strategies.

The Pioneer CAT Bond Fund and the Pioneer ILS Interval Fund are designed to provide investors with exposure to the ILS and catastrophe bond markets, offering a unique investment opportunity.

By surpassing $1.35 billion in AUM, these funds have demonstrated their potential for growth and stability, making them an attractive option for investors seeking to diversify their portfolios.

The costs associated with the GAM Star Fund plc - GAM Star Cat Bond Class Institutional EUR Income Hedged are quite straightforward. The ongoing fees come in at 1.08%.

You'll notice that a significant portion of this, 0.95%, is attributed to the annual management fee. This is a standard cost for most investment funds.

The exit fee, on the other hand, is a zero percent charge. This means you won't have to worry about paying extra to sell your shares.

Another notable cost is the performance fee, which is a whopping 10% per annum. This is a significant charge that's triggered when the fund's performance exceeds a certain threshold.

Here's a breakdown of the costs associated with the fund: