Ambassador cat bond fund continues growth, reaching $127.7m in assets

The Ambassador mutual catastrophe bond fund strategy has continued to grow in the latest quarter of record, adding close to $30 million in assets in the period to October 31st 2023, to reach $127.7 million in net assets under management.

The Ambassador Fund was launched in the third-quarter of 2021 by investment manager Embassy, which has a focus on non-correlated strategies and delivering income to its clients, and became the latest in a string of US mutual investment fund structures with a focus on managing investments in catastrophe bonds and insurance-linked securities (ILS).

At the time of its launch, the Ambassador cat bond fund counted quota share reinsurance focused insurance-linked securities (ILS) investment fund manager Tangency Capital as its sub-adviser, but as we later reported that company stepped down from the position.

At that time, cat bond specialist and former Nephila Capital executive Niall MacGillivray parted ways with Tangency Capital to become the dedicated portfolio manager to the Ambassador catastrophe bond mutual fund strategy.

The Ambassador Fund began allocating capital to catastrophe bonds in the quarter to April 30th of 2023, while also renewing a private ILW arrangement.

The mutual cat bond fund’s total net assets had reached just over $82.1 million at April 30th 2023, but then rose further to an important level of $100.6 million at July 31st 2023, surpassing the all-important level required to qualify as a QIB.

A QIB, or qualified institutional buyer, is a type of institutional investor that can be directly sold securities via a private placement under Rule 144A, so reaching this level opened up the pipeline of cat bond issuance to the Ambassador fund.

Also in the quarter to July 31st, the Ambassador Fund allocated to its second industry-loss warranty (ILW) investment, taking a second preferred note under the Consulate Re vehicle.

Despite the next quarter of record, to October 31st 2023, being a quieter time for new cat bond issuance, the Ambassador Fund grew its total assets by roughly one-third, to reach $127.7 million.

That portfolio now consists of more than 60 cat bonds from a variety of issuers, as well as other ILS securities in the ILW arrangements, plus a small amount of US treasuries.

This shows the manager was both raising new assets from investors and able to efficiently deploy them into new cat bond positions in the last quarter of record, with the secondary market the likely source of new cat bond investments, given the slower issuance pipeline through the months of August, September and October.

Having only achieved its QIB status in March of 2023, it’s impressive that the Ambassador Fund delivered a net return of almost 12% for the year to October 31st 2023.

The investment manager remains bullish on the catastrophe bond market and anticipates further growth.

Embassy said its its investor letter, “In our opinion, market conditions for cat bonds remain very attractive. Recent natural catastrophe activity has caused pricing to improve.

“In addition, we believe cat bond issuance will continue to increase as reinsurers seek alternative sources of capital.”