There was a time when investing in catastrophe bonds was the preserve of hedge funds and other sophisticated alternative asset managers. But after underpinning the best hedge fund strategy of 2023, the bonds are finding a wider audience.
Catastrophe-bond funds marketed under Europe’s UCITS label, which is designed to protect retail investors, have seen their assets under management rise 12% this year to a record $12 billion, according to Kepler Partners, a research and advisory firm. The development means that cat bonds, as they’re often called, sold through UCITS now make up roughly a quarter of the entire market for such debt.
“We’ve seen a broadening of the UCITS market for cat bonds since the end of 2022,” said Matthew Barrett, partner at Kepler. “It’s a very rich period for the asset class.”
Catastrophe bonds are generally issued by insurers looking to pass a chunk of their risk over to capital