Highbridge-Linked Reinsurer Raises $1.1B

Apr 2 2014 | 10:06am ET

Another hedge fund has joined the reinsurance industry, and it’s the biggest to do so yet.

Highbridge Capital Management has partnered with Arch Capital Group to launch Watford Re in Bermuda. The new reinsurer debuted yesterday after raising more than $1.1 billion in initial capital.

Arch’s underwriting arm will serve as Watford’s reinsurance manager, while Highbridge’s Principal Strategies will manage the company’s premiums. The hedge fund, which is owned by JPMorgan Chase, will invest primarily in junk bonds, Watford said, “which it believes will generate attractive risk-adjusted returns for its shareholders over the long term.”

With Watford’s launch, Highbridge joins the likes of Greenlight Capital, Pine River Capital Management, SAC Capital Advisors and Third Point in setting up reinsurers, which provide a source of permanent capital to managers. SAC sold its SAC Re to Two Sigma Investments last year, following its guilty plea to insider-trading charges.

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