The broadly diversified portfolio of insurance-linked securities (ILS) and reinsurance investments managed by pension funding agency PGGM on behalf of end-client the Dutch pension PFZW, has returned 5.5% over the first-half of 2024.
The 5.5% ILS portfolio return for the first-half of 2024 is barely down on the prior 12 months’s 6.3%.
We suspect that the unfold developments seen within the disaster bond market through the second-quarter might have been a partial driver of the slight decline.
But it surely’s additionally vital to notice that the return of all ILS market benchmark indices are monitoring barely behind 2023 this 12 months, which is maybe no shock given final 12 months noticed information damaged, however that the first-half of 2023 additionally noticed ILS traders and ILS funds benefiting from restoration of values of sure ILS belongings after hurricane Ian.
It’s additionally price noting that the 5.50% half-year return for H1 2024 from the ILS portfolio continues to be far increased than the portfolio had achieved for H1 of years 2017 by means of 2022.
By the tip of June there had been a slight decline within the worth of belongings within the PGGM managed PFZW ILS portfolio, in US greenback phrases.
To recap, at December thirty first 2023 the PFZW ILS portfolio consisted of EUR 8.219 billion of ILS belongings, which was simply barely over US $9 billion at the moment.
By the tip of the first-quarter of this 12 months, at March 31st 2024, the ILS portfolio had shrunk to EUR 7.724 billion in size, which at that date was equivalent to roughly US $8.35 billion.
Now, within the newest quarterly disclosure made by PFZW, the pension fund’s ILS portfolio is reported at EUR 7.693 billion, which at June thirtieth was equal to only below US $8.24 billion.
So, in Euro phrases the PGGM managed PFZW ILS funding portfolio was down simply -0.4%, whereas in USD phrases it was valued down by -1.38%.
Not important by any means and this might simply be largely valuation primarily based, particularly given the cat bond unfold developments.
It’s additionally price noting that the ILS portfolio stays on-target at 3.2% of PFZW’s belongings on the mid-year, which is identical share as 1 / 4 earlier, so suggests a great deal of stability in the primary, other than potential valuation results.
As we’ve said earlier than as nicely, given how PGGM allocates and invests the capital throughout ILS alternatives for PFZW, adjustments in valuation don’t essentially imply adjustments in publicity to the market, or return potential both.
PGGM has labored laborious to ascertain quite a few environment friendly entry factors to the reinsurance market, which imply it may modify allocations throughout them and nonetheless preserve its targets for the pension consumer PFZW.
Lastly, it’s price mentioning that PGGM’s ILS funding staff has been working during the last couple of years to maintain the portfolio of ILS belongings nearer to the allocation goal it has been set, so stability in that respects suggests the funding supervisor has maybe neared a stage the place the portfolio will stay extra balanced for a time.
PGGM stays the biggest single investor listed in our directory of pension funds and sovereign wealth funds investing in ILS and reinsurance.
