GAM FCM ILS Yield

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Que sont les Cat Bonds ?

GAM FCM ILS Yield fund seeks to capture attractive, long-term, positive returns through an actively managed portfolio of global catastrophe (cat) bonds. Managed by a recognised industry leader in the insurance risk sector, Fermat Capital Management, the strategy has over a 10-year track record of long-term positive results and exhibits low correlation to traditional asset classes.

What are Cat Bonds?

Crucially for portfolio diversification, cat bonds have typically low correlation to more traditional investments, even during periods of heightened volatility."

Our Edge

Deep ILS experience

Established in 2001, Fermat's combined expertise in catastrophe re/insurance, investment, legal, trading, risk and modelling enables it to fully analyse each ILS on an absolute and relative basis.

Active approach to ILS selection

The team seek only the highest quality, most stable opportunities at any given time, with only ILS instruments providing the most attractive portfolio risk / reward impact selected for inclusion, rather than merely engaging in diversification for diversification's sake.

Unique risk modelling approach

The team utilise a proprietary modelling tool, harnessing the output of three major commercial catastrophe risk management packages, in order to identify unintended risk and correct any inconsistencies and biases. The combination of these tools gives the team an edge in accurate risk modelling and tactical portfolio decision making.

Investment Team

Fermat is a recognised insurance-risk industry leader and highly experienced cat bond manager, based in the US. The portfolio managers, Dr John Seo, Nelson Seo and Brett Houghton, manage assets of approximately USD 8.1 billion and have over 50 years' combined experience in ILS and cat bonds, dating back to the inception of the market in the late 1990s.

The level of experience and in-depth market knowledge is critical to Fermat's ability to identify the true risk of each bond, as well as granting them ready access to new issuances.

Over time, the team have demonstrated their expertise by actively trading billions of dollars in catastrophe bonds through a series of large insurance industry events and natural catastrophes, while providing stable returns for clients and maintaining high levels of liquidity.

Fermat differentiates itself with a focus on adequate compensation for identifiable risk while avoiding uncompensated risk.

Dr John Seo

Cofondateur et directeur général de Fermat Capital

Nelson Seo

Cofondateur et Managing Director de Fermat Capital

Brett Houghton

directeur général de Fermat Capital Management

Philosophy and Process

Investment Philosophy

The team believes returns from catastrophe investments are driven by a fundamental mismatch between re/insurance regulation and the demand for insurance created by rapidly rising coastal and urban concentrations of economic activity worldwide.

They believe that through active bond selection and management, they can construct a portfolio of cat bonds with a risk-return structure that aligns with the best paying re/insurance risks, and therefore capture alternative beta at the optimal risk-return level. Their approach focuses on 'peak peril' exposures while maintaining a rational level of diversification.

Investment Process

The team's process centres on extensive due diligence, deep market understanding and sophisticated risk modelling. In-depth analysis of issues is performed by specialist investment and legal experts.

In order to price and select those ILS that are taken forward for consideration, the team uses sophisicated risk modelling tools - focusing on ILS exceedance curve modelling, market exceedance curve modelling and implied yield curve modelling - to understand each bond's true risk. They seek to build a portfolio containing only clearly modelled, well-compensated risks that are supported by quality data, and then to actively manage risk. The resulting portfolio of approximately 150-200 positions is constructed on a bottom-up basis, with those bonds providing the most attractive portfolio risk/reward impact being selected for inclusion.

Due Diligence

Comprehensive review of structures, terms and risks
Comparison versus existing market and new issue pipeline

Pricing and Selection

Sophisticated proprietary modelling of each investment
Understanding risk is key to determining price

Portfolio Construction

Optimise portfolio's risk/return profile
Risks actively managed on a daily basis

Reasons to Invest

Diverse source of returns

Returns are linked to the occurrence of catastrophes – such as earthquakes or windstorms – rather than economic drivers and therefore cat bonds tend to perform independently of traditional asset classes.

Stable source of alternative returns

Cat bonds are a form of insurance-linked security (ILS) and provide an efficient solution for re/insurers to transfer insurance risk from their balance sheets to capital markets, while seeking to offer steady, attractive yields in a low yield environment.

Low exposure to traditional risk

The uncorrelated nature of the asset class to the broader market means there is low exposure to credit, interest rate and financial market risk.

Solid track record

A track record of delivering positive returns during differing market environments underpins the value of this asset class as a portfolio diversifier.

Key Risks

Capital at risk

All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

Credit Risk / Non-Investment Grade

Non-investment grade securities, which will generally pay higher yields than more highly rated securities, will be subject to greater market and credit risk, affecting the performance of the Fund.

Interest Rate Risk

A rise or fall in interest rates causes fluctuations in the value of fixed income securities, which may result in a decline or an increase in the value of such investments.

Credit Risk / Debt Securities

Bonds may be subject to significant fluctuations in value. Bonds are subject to credit risk and interest rate risk.

Insurance-Linked Securities Risk

Cat bonds are exposed to catastrophes through which they may suffer substantial or total losses of amounts invested. In such an event or combination of events, which may happen at any time, the Fund’s value may fall significantly and may not recover.

Liquidity Risk

Some investments can be difficult to sell quickly which may affect the value of the Fund and, in extreme market conditions, its ability to meet redemption requests.

Our Thinking

Fund Information

Contact Us

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Contacts

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Mentions légales: Les performances passées ne sont pas un indicateur des performances futures ni des tendances actuelles ou futures. Les indications pourraient se fonder sur des chiffres libellés dans une devise pouvant différer de la devise de votre pays de résidence et le rendement peut de ce fait évoluer à la hausse comme à la baisse en conséquence de fluctuations de change. Capital sous risque: Les instruments financiers engendrent un facteur de risque. Par conséquent, la valeur de l’investissement et le rendement qui en résulte peuvent varier et la valeur initiale de l’investissement investi ne peut pas être garantie. Aucune référence à un titre financier ne saurait constituer une recommandation d'achat ou de vente de ce titre.