December 9, 2023

Returns on private ILS funds (that is, funds that invest in privately traded insurance-linked securities (ILS), including mortgage reinsurance and retrocession) outperformed pure-play cat bond funds for the first time this year in May 2023.

ILS Fund and Catastrophe Bond Fund Performance Return IndexThat’s according to the Eurekahedge ILS Advisers Index, which shows ILS funds returning an average of 1.17% in May, the best month for ILS funds so far this year, as measured by the index.

The average ILS fund return of 5.48% in the first five months of 2023 is only slightly below the record for this period in 2007.

Pure cat bond funds have outperformed private ILS and mortgage reinsurance fund strategies through the first four months of the year, leading each month so far.

However, in May 2023, private ILS fund strategies as a whole accelerated their return, causing them to beat pure cat bond funds for the first time this year.

Below you can view the performance of the two ILS fund segments by month.

cat bond fund private ils fund returns

Every fund in the index tracked by ILS Advisers reported positive returns in May 2023.

The lowest performance reported was a return of 0.50% for the month, while the highest performance came from the ILS Fund, which returned 1.83% in May 2023.

As private ILS funds start to show seasonality, we should see higher average returns as long as there are no major catastrophe losses.

As we recently reported, many insurance-linked securities (ILS) fund strategies have delivered decade-high returns so far at least through 2023 amid a higher reinsurance rate environment and higher spreads on instruments such as cat bonds.

The Eurekahedge ILS Advisers Index continues its best performance since 2007 and could easily post record returns if catastrophe loss activity remains benign for the rest of the year.

ILS Fund and Catastrophe Bond Fund Performance Return Index

You can track the Eurekahedge ILS Advisers Index on Artemis, including the USD-hedged version of the index. It tracks the performance of an equal-weighted index of 26 constituent ILI funds and is the first benchmark that allows for the comparison of different ILS fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.

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