Mon, 03/04/2006 - 07:59
Diego Wauters outlines the working of Coriolis Capital Limited, which focuses on strategies for the insurance/reinsurance sector.
Wauters is CEO of Coriolis Capital Limited, a hedge fund company based in London specializing in exotic products in the insurance/reinsurance sector. Coriolis was created in July 2003, following a friendly management buyout from Société Générale.
Prior to this, Diego was Global Head of Insurance and Weather Derivatives at SG. He joined the London office in 1998, after spending four years with AIG. Diego was founder, President and CEO of AIG Combined Risks, which specialised in insurance derivatives and was a pioneer in Catastrophe Bonds and Weather Derivatives. Prior to this, he spent 11 years at JPMorgan in New York, where he was involved in the creation of some of the biggest start up insurance companies established offshore, and London where he became Managing Director in charge of M&A Insurance and Financial Reinsurance.
HW: What is the background to Coriolis Capital?
DW: We have a number of funds, all revolving around the insurance and reinsurance sectors. For example, we have a Natural Catastrophe Bonds Fund, a Weather Derivatives Fund and a Long/Short Equity Fund in the insurance and reinsurance sector. We also have funds combining some of these asset classes together.
Our current AUM is USD 270 million.
HW: How and where do you distribute the funds? What is your current and targeted client base?
DW: Our investors are large financial institutions in Europe, offshore and Canada. They are insurance companies, pension funds, private banks or family offices. We also have a few Funds of Funds. We tend to do the marketing by ourselves.
HW: What is the investment process of your funds?
DW: Each asset class requires us to participate in a specialized market. For example, we deal in the Natural Catastrophe Bonds and Weather Derivatives markets, in the life insurance notes market, etc.
HW: How do you generate ideas for your funds?
DW: It depends on the fund. For example, for our Long/Short Equity Fund in the insurance and reinsurance sector, we use a mergers and acquisition valuation approach. When we trade in Weather Derivatives, we use our proprietary statistical pricing models. For our non-equity funds, we tend to use a diversification/hedging strategy.
HW: What is your approach to managing risk?
DW: For our Natural Catastrophe Bonds and Weather Derivatives funds, we tend to diversify geographically and by type of exposure (i.e. rain, snow, temperature, typhoons, earthquakes etc). When it comes to our Long/Short Equity Fund in the insurance and reinsurance sector, we tend to have a balance between long and short positions so that the fund is essentially market neutral.
HW: How/against what do you benchmark the performance of your fund?
DW: Our objective is to achieve the highest possible spread over 3 Months Treasuries with the lowest possible volatility.
HW: Has your performance been as per budget and expectations? Do you expect your performance or style to change going forward?
DW: For the last six years, our performance has been more or less as expected, except for the impact of Hurricane Katrina on our Natural Catastrophe Bonds Funds in 2005 which finished the year more or less flat. We have no intention to change our strategy in the future, except by adding a small amount of leverage to increase returns.
HW: What opportunities are you looking at right now?
DW: We always look for new products or developments in the insurance/reinsurance sector. For example, we recently invested in aviation accident options and refinery explosions transactions.
HW: How will these changes/future events impact on your own portfolio?
DW: These new products help us diversify our exposures, as they tend to be uncorrelated.
HW: What differentiates you from other managers in your sector?
DW: We have, we believe, the longest track record in this highly specialized field, with one of the lowest volatilities. Also, we have enjoyed a positive return every year for practically all our funds.
HW: Do you have any plans for similar/other product launches in the near future?
DW: At some point we may approach US investors for our funds.
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