Eurekahedge has teamed with ILS Advisers to launch a hedge fund index focusing on insurance-linked securities.
The Eurekahedge ILS Advisers Index is based on the premise that insurance-linked securities funds are “bucking the trend” toward correlation amongst asset classes. The hedge fund data provider says that while equity markets collapsed between May 2008 and February 2009 (the MSCI All Countries World Index fell 46% over this period), ILS funds returned, on average, 1%.
Said Eurekahedge CEO Alexander Mearns, "In the current market environment trying to find superior risk-adjusted returns is like looking for black cats in a coal mine. Insurance linked securities hedge funds are those cats!"
Insurance linked securities, also known as catastrophe or cat bonds, represent a transfer of insurance risk to the capital markets, usually by insurance or reinsurance companies. Typically, ILS funds diversify their exposure across different perils such as natural catastrophe (wind, earthquake) and man-made risk and across different geographies.
The new index is an equally weighted index of hedge funds that explicitly allocate to insurance linked investments and have at least 70% of their portfolio invested in non-life risk. Eurekahedge says the index dates from December 2005 and has returned 52.38% through January 2012 with an annualized return of 7.17% and an extremely low volatility.
ILS Advisers was founded in Hong Kong by Stefan K. Krauchi and Hansrudolf Schmid in 2011 as part of HSZ (Hong Kong), an independent asset manager.