ILS funds continue solid performance, average 4.37% return at half-year

The broad benchmark index for insurance-linked securities (ILS) funds, the Eurekahedge ILS Advisers Index, has delivered a 4.37% return for the first six months of 2024, which is the third best half-year performance in its history.

The total would have been higher were it not for the catastrophe bond spread widening seen in May 2024, as that month almost turned negative for the Index.

June 2024 saw the catastrophe bond and ILS funds tracked by the Eurekahedge ILS Advisers Index deliver an average return of 0.76%, which was the fourth highest June performance since this Index began tracking ILS fund returns in 2006.

Commenting on June’s ILS fund returns, ILS Advisers explained that, “ILS continues its solid performance.”

This was despite June seeing the first major hurricane threat of the year in Beryl, which ILS Advisers notes, “should not pose a threat to the ILS market, other than erode aggregate structures.”

The catastrophe bond market rose by 1.12% for the month, according to Swiss Re’s Index, which helped cat bond funds outperform.

As a result, for June 2024, pure cat bond funds as a group were up 0.81%, helped by some recovery in the month after the spread widening effects.

Meanwhile, the sub-group of ILS funds whose strategies include private ILS, so collateralized reinsurance and retrocession arrangements, was a little behind in gaining +0.71% for the month.

While returns for both cat bond funds and private ILS strategies are running behind the first-half of 2023, if it were not for the cat bond spread development seen the returns could have been at least half a percent higher by the middle of the year, it appears.

With private ILS funds set to deliver much more of their returns through the wind season, we expect that bucket will begin to outpace cat bond funds more meaningfully, loss activity allowing.

For the moment, it is very balanced between the two categories so far in 2024, with cat bond funds lagging just slightly behind the private ILS strategies as a group.

In June, 24 of the ILS funds represented in the Eurekahedge ILS Advisers Index were positive for the month while 2 were negative.

The range of performance was a spread from negative -1.09% for the month, to +2.71% in June.

You can track the Eurekahedge ILS Advisers Index here on Artemis, including the USD hedged version of the index. It comprises an equally weighted index of 27 constituent insurance-linked investment funds which tracks their performance and is the first benchmark that allows a comparison between different insurance-linked securities fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.