Key Takeaways
- • Eurekahedge and ILS Advisers launched a USD-hedged version of their insurance linked securities (ILS) benchmark index, expanding on the original equally weighted index of 32 hedge funds with at least 70% portfolio allocation to non-life insurance risk.
- • The original index, incepted in December 2005, delivered cumulative returns of 71.27% through January 2014 with an annualized return of 6.88% and a Sharpe ratio of 2.17—among the highest across Eurekahedge's suite of indices.
- • The new USD-hedged variant posted 7.18% annualized returns with 2.30% volatility through end-2013, demonstrating a compelling risk-adjusted profile relative to alternative investment vehicles and traditional asset classes.
- • The ILS asset class reached a milestone in 2013 with catastrophe bond issuance surpassing $20 billion in outstanding value for the first time, signaling growing institutional capital deployment in insurance-linked investments.
- • The index has gained acceptance among ILS investors, funds, consultants, and advisers as a representative benchmark for the insurance-linked securities asset class since its inception.
Summary
Eurekahedge, an alternative fund data provider, and ILS Advisers unveiled a USD-hedged version of their insurance linked securities index on February 21, 2014, building on a successful benchmark launched in 2012. The new product tracks an equally weighted portfolio of 32 hedge funds that explicitly allocate to insurance-linked investments with a minimum 70% portfolio weighting in non-life risk assets.
The original index, established in December 2005, has become an increasingly accepted performance benchmark within the ILS investment community. Through January 2014, the index posted cumulative returns of 71.27% with an annualized return of 6.88% and volatility that has produced one of the highest Sharpe ratios across all Eurekahedge indices at 2.17. This risk-adjusted performance profile positions the index competitively against other alternative investment vehicles and traditional asset classes.
The newly released USD-hedged version of the benchmark provides currency protection for international investors. Through the end of 2013, the USD-hedged variant delivered 7.18% annualized returns with 2.30% volatility, offering a marginally higher return profile relative to the base index while maintaining a disciplined volatility structure. Both versions are base weighted at 100 as of December 2005.
The index launch occurs against a backdrop of accelerating capital formation in insurance-linked securities. The ILS asset class achieved a significant milestone in 2013 when outstanding catastrophe bonds surpassed $20 billion in aggregate value for the first time, reflecting growing institutional appetite for insurance risk transfer mechanisms. The index's acceptance among institutional investors, fund managers, and advisory consultants underscores its role as a standardized performance reference for the maturing ILS sector.
The original index, established in December 2005, has become an increasingly accepted performance benchmark within the ILS investment community. Through January 2014, the index posted cumulative returns of 71.27% with an annualized return of 6.88% and volatility that has produced one of the highest Sharpe ratios across all Eurekahedge indices at 2.17. This risk-adjusted performance profile positions the index competitively against other alternative investment vehicles and traditional asset classes.
The newly released USD-hedged version of the benchmark provides currency protection for international investors. Through the end of 2013, the USD-hedged variant delivered 7.18% annualized returns with 2.30% volatility, offering a marginally higher return profile relative to the base index while maintaining a disciplined volatility structure. Both versions are base weighted at 100 as of December 2005.
The index launch occurs against a backdrop of accelerating capital formation in insurance-linked securities. The ILS asset class achieved a significant milestone in 2013 when outstanding catastrophe bonds surpassed $20 billion in aggregate value for the first time, reflecting growing institutional appetite for insurance risk transfer mechanisms. The index's acceptance among institutional investors, fund managers, and advisory consultants underscores its role as a standardized performance reference for the maturing ILS sector.
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