Credit Suisse has just launched an Australian domiciled unit trust for Insurance Linked Strategies (ILSs), said the group’s head of third party distribution Josh Peel.
Peel, who heads alternative investments, said the portfolio managers are an experienced interdisciplinary team “led by a physicist and meteorologist considered a pioneer in this space”.
Credit Suisse’s IRIS Low Volatility Fund offers wholesale investors access to a niche source of alpha that has a low correlation to traditional financial market risk factors, according to Peel.
Historically, the correlation to financial markets of IRIS Low Volatility has been less than 0.2 (based on the data period May 2001 to August this year).
“ILSs can be thought of as a true alternative accessing a different source of risk premia to other asset classes,” Peel told I&T News.
“The investment manager seeks to build a diversified portfolio of insurance risks, which depend on insurance related events such as natural catastrophes, for example earthquakes and hurricanes, as well as man-made catastrophes.”
Essentially the strategy involves investors providing insurance to the insurers or re-insurers, who pay a premium to receive a certain amount of cover in the case of the occurrence of an event meeting set criteria.