Key Takeaways
- • Eurekahedge and ILS Advisers launched a USD-hedged version of their insurance-linked securities (ILS) hedge fund index, expanding on the original benchmark introduced in 2012 that tracks 32 funds with at least 70% portfolio allocation to non-life insurance risk.
- • The index has delivered a cumulative return of 71.27% since inception in December 2005 through January 2014, with an annualized return of 6.88% and a Sharpe ratio of 2.17—among the highest across all Eurekahedge indices—demonstrating exceptional risk-adjusted performance with minimal volatility.
- • The USD-hedged version generated 7.18% annualized returns with 2.30% volatility through end-2013, positioning the benchmark as a representative performance standard for institutional ILS investors, consultants, and fund managers.
- • The insurance-linked securities asset class reached a milestone in 2013, with outstanding catastrophe bonds surpassing $20 billion in total value for the first time, reflecting growing institutional capital deployment into catastrophe risk.
- • The Eurekahedge ILS Advisers Index, comprising equally weighted hedge funds specializing in insurance-linked investments, has achieved increasing institutional acceptance as a fair and comprehensive benchmark for the ILS asset class.
Summary
Eurekahedge, an alternative fund data provider, has expanded its insurance-linked securities benchmark by launching a USD-hedged version of the Eurekahedge ILS Advisers Index in partnership with ILS Advisers. The initiative follows the successful introduction of the original index in 2012, which tracks the performance of 32 hedge funds that explicitly allocate to insurance risk, requiring a minimum 70% portfolio allocation to non-life risk investments.
The index's performance metrics underscore the asset class's attractive risk-return profile for institutional investors. Since inception in December 2005, the benchmark has generated cumulative returns of 71.27% through January 2014, translating to an annualized return of 6.88% paired with exceptionally low volatility. The resulting Sharpe ratio of 2.17 ranks among the highest across all Eurekahedge indices, signaling superior risk-adjusted returns relative to alternative investment vehicles and traditional asset classes. The newly launched USD-hedged version delivered 7.18% annualized returns with 2.30% volatility through the end of 2013, providing currency-protected exposure for institutional allocators with USD liabilities.
The benchmark has achieved significant institutional traction since its establishment. ILS Advisers, in partnership with Eurekahedge, developed the index as an equally weighted benchmark reflecting the performance of specialized hedge funds within the ILS ecosystem. The index has garnered broad acceptance among ILS investors, dedicated ILS funds, consultants, and investment advisers as a representative and fair performance standard for the insurance-linked securities asset class.
The timing of this index expansion coincides with notable growth in the broader ILS market. During 2013, outstanding catastrophe bonds—a key component of insurance-linked securities—surpassed $20 billion in total value for the first time, marking a significant inflection point for institutional capital flows into catastrophe risk. This expansion reflects increasing demand from institutional investors seeking diversified, non-correlated return streams and the maturing infrastructure supporting ILS investments across global markets.
The index's performance metrics underscore the asset class's attractive risk-return profile for institutional investors. Since inception in December 2005, the benchmark has generated cumulative returns of 71.27% through January 2014, translating to an annualized return of 6.88% paired with exceptionally low volatility. The resulting Sharpe ratio of 2.17 ranks among the highest across all Eurekahedge indices, signaling superior risk-adjusted returns relative to alternative investment vehicles and traditional asset classes. The newly launched USD-hedged version delivered 7.18% annualized returns with 2.30% volatility through the end of 2013, providing currency-protected exposure for institutional allocators with USD liabilities.
The benchmark has achieved significant institutional traction since its establishment. ILS Advisers, in partnership with Eurekahedge, developed the index as an equally weighted benchmark reflecting the performance of specialized hedge funds within the ILS ecosystem. The index has garnered broad acceptance among ILS investors, dedicated ILS funds, consultants, and investment advisers as a representative and fair performance standard for the insurance-linked securities asset class.
The timing of this index expansion coincides with notable growth in the broader ILS market. During 2013, outstanding catastrophe bonds—a key component of insurance-linked securities—surpassed $20 billion in total value for the first time, marking a significant inflection point for institutional capital flows into catastrophe risk. This expansion reflects increasing demand from institutional investors seeking diversified, non-correlated return streams and the maturing infrastructure supporting ILS investments across global markets.
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