RMF has concluded a seeding arrangement through its hedge fund ventures programme with ISPartners Alternative Risk Advisors AG.
Under the terms of agreement, RMF - a subsidiary of Man Investments - will make a significant initial investment in ISPartners' ISP Event Linked Securities Fund Limited, a hedge fund that will pursue market opportunities by exploiting the benefits offered by investing in insurance or event linked securities such as catastrophe bonds, industry loss warranties, catastrophe index derivatives and derivatives based on (re-) insurance contracts.
Such securities offer attractive returns that are very weakly or non-correlated to most fixed income and equity markets as well as hedge fund investments. The occurrence of natural events, such as earthquakes, rarely coincides with a change in interest rates or the movement in stock market indices, whereas the latter can under no circumstances provoke such natural events.
Stefan Mueller and Karsten Bromann run ISPartners Alternative Risk Advisors. Mueller was previously a senior alternative risk transfer and insurance linked securities specialist at Converium, responsible for its worldwide approach to transfer insurance linked risks to capital market investors. From 1996 to 1999, he was an alternative risk transfer underwriter in Centre Re's Swiss organisation focusing predominantly on implementing financial solutions for insurance risks. He has a Masters degree in finance from the University of Zurich.
Bromann obtained his PhD in physics from the Federal Institute of Technology Lausanne and is a qualified actuary with full membership in the German Actuarial Society. From 1998 to 2004, he worked in several actuarial roles as a vice president for the Zurich Insurance Company.
Mueller will develop the organisation, manage the portfolio and oversee the trading, while Bromann will be responsible for quantitative risk assessment and overall portfolio risk management. The team uses ISPartners' infrastructure and is supported by a group of senior investment professionals and industry experts.
Claude Porret, member of the management committee and head of Hedge Fund Ventures at RMF, said: "ISPartners Alternative Risk Advisors is a Swiss-based manager, which shows that good hedge fund managers can be found just next door. We hope to close future deals with local high-quality managers to strengthen the hedge fund culture in Switzerland. This investment has opened our programme to the emerging insurance linked securities asset class and we are convinced that this will add a substantial performance driver to our well-diversified portfolio.
"We are also confident that Stefan Mueller and his team will be able to capture attractive investment opportunities, to compose a diversified portfolio and to build a robust infrastructure and organisation."
Mueller is excited by the agreement with RMF and the outlook for the nascent insurance linked derivatives market. "The current economic environment of low interest rates and considerable uncertainty in the stock and credit markets as well as insurance-specific factors such as an ever-increasing strain on (re-) insurer's balance sheets, capital shortage and rating agency pressure, favours the direct participation in genuine insurance exposures through insurance linked securities and will offer interesting investment opportunities to our investors," he said. "I'm very pleased to have sound partners on board allowing us to develop quickly in this knowledge intensive environment."
The SP Event Linked Securities Fund Limited joins a growing list of funds in RMF's Hedge Fund Ventures portfolio, including:
• Brookville Capital, a US distressed and special situations fund
• Arlington Hill Debt Strategies, a global fixed income arbitrage fund
• Drake Global Opportunities, a relative value and global macro fund
• Coromandel Trend Fund, a systematic CTA fund
• Stone Harbor Advisors, a Japanese event-driven fund
• Derchin Offshore, a US long/short equity fund
• Panton Capital, a US credit arbitrage fund
• Azura Asia Opportunity, an Asian multi-strategy macro fund
• Pyrenees Weather and Energy, an event-driven fund
• D3 Partners, a relative value fund
• Phoenix Japan fund, a Japanese long/short equity fund