What catastrophe bonds can add to your portfolio

FIXED INCOME

clock

John Seo, co-founder and managing principal at Fermat Capital Management, and manager of the GAM Star Cat Bond fund, outlines the drivers behind this alternative fixed income asset class.

In a world of specialist asset classes whose ‘alternative’ status is undermined by correlations with other risk assets, catastrophe bonds offer diversification on a fundamental level. Because their pricing is not driven by economic or corporate events, catastrophe (cat) bonds have very low correlation to mainstream markets. Correlation between cat bonds and global government bonds has been only 0.13 and correlation to global equities has been 0.17, both measured since the launch of the Swiss Re BB Rated Cat Bond index in January 2002. Moreover, cat bonds typically offer higher yiel...

To continue reading this article...

Join Investment Week for free

  • Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
  • Get ahead of regulatory and technological changes affecting fund management
  • Important and breaking news stories selected by the editors delivered straight to your inbox each day
  • Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
  • Be the first to hear about our extensive events schedule and awards programmes

Join now

 

Already an Investment Week
member?

Login

More on Investment

Stories of the week: Employment, gilts, and Saba Capital

Stories of the week: Employment, gilts, and Saba Capital

Permanent vacancies, gilts, and trust activism: The biggest stories from the world of investment and asset management this week

clock 14 February 2025 • 1 min read
Morningstar's Kenneth Lamont: Five key questions on the shift in asset management

Morningstar's Kenneth Lamont: Five key questions on the shift in asset management

'Year of significant transformation'

Kenneth Lamont
clock 11 February 2025 • 4 min read
Janus Henderson Investors' Julian McManus: Active investing in an era of market concentration

Janus Henderson Investors' Julian McManus: Active investing in an era of market concentration

Lessons from DeepSeek shock

Julian McManus
clock 10 February 2025 • 3 min read
Trustpilot