GAM has teamed up with Fermat Capital Management to launch a catastrophe bond fund, becoming the latest manager to make a product based around 'tail events' available to the wider public.
GAM has teamed up with Fermat Capital Management to launch a catastrophe bond fund, becoming the latest manager to make a product based around ‘tail events’ available to the wider public.
The CHF53.6bn asset manager has invested with Fermat for over six years.
GAM will be sole distributor of the GAM FCM Cat Bond, taking commitments of at least $25,000 from today.
The monthly dealing fund will seek to capture the structural return from the catastrophe market by investing in catastrophe bonds, complimented by other insurance linked securities.
John Seo, co-founder of $2.2bn manager Fermat, said: “Given catastrophe bonds’ unique underlying risks, they are likely to remain a truly uncorrelated asset class. During the recent financial crisis, ‘cat bonds’ have proven that they deserve their reputation as a genuine alternative investment strategy.”
GAM says cat bond returns are independent of macroeconomic or financial factors, in contrast to most asset classes, but rather depend on the occurrence – or not – of natural catastrophes.
Investors with $1.3trn in hedge funds told Deutsche Bank in January ‘low correlation to other asset classes’ was among the three primary reasons they invest in hedge funds.
Insurance-linked strategies were among the three most sought after strategies by institutional investors that allocated directly to hedge funds last year, according to consultants Towers Watson.
Other managers to have launched funds linked in some way to catastrophes – but mainly those on financial markets – include Man Group, Capula Investment Management, and Saba Capital.
They aim to protect investors’ broader portfolios by rising in value when disasters strike.