Gains from a series of winning bets on catastrophe bonds helped hedge fund Fermat Capital Management, one of the world’s largest investors in insurance-linked securities (ILS), record its best annual performance since the firm launched over 20 years ago, according to a report by Bloomberg.
The report quotes Managing Director Brett Houghton as confirming that the $10.8bn fund’s gains were “in line” with the 20% gain seen in the Swiss Re Global Cat Bond Performance Index.
With regards to cat bond investors, Houghton said in an interview: “2023 was a unicorn year where you have great returns and equilibrium in the market.”
Fermat holds stakes in 80% of the roughly 280 cat bond securities currently in the market, making it one of the world’s biggest players in the sector. The bonds, which typically have maturities of three to five years, are becoming increasingly popular with issuers as insurers seek protection from increased climate change-related risk, as well as new high-risk scenarios including cyberattacks.
According to data from Artemis, a firm that tracks the cat bond and insurance-linked securities market, $5.6bn in new cat bonds were issued in Q4 2023, taking full-year volumes to a record high of $16.4bn and bringing the total outstanding market to a record $45bn.
