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AXA IM's Francois Divet: Why insurance linked securities can offer investors diversification

AXA IM's Francois Divet: Why insurance linked securities can offer investors diversification

11 September 2015

"The ILS market is not affected by what happens in any one major economy, such as China, in the same way that other asset classes can be. Perhaps a good example of this is the fact that catastrophe bond (cat bond) risk adjusted prices remained stable throughout August (source: Swiss Re Capital Markets, August 2015), whereas looking at the global economy more broadly, many other asset classes suffered, including international currencies and global stock markets.

"Following the volatility of global financial markets in August, we can certainly see momentum in ILS with strong interest from European pension funds and family offices. This includes our own recent significant mandate win from a leading Dutch institutional investor.

"A key feature of the ILS asset class is its low correlation with traditional financial markets. For ILS, the underlying risk is tied only to the occurrence of major natural catastrophes, not to the wider economic outlook or the global financial environment. This means that the current major headaches for global investors such as the uncertainty around US interest rates and China's slowing economy, do not impact ILS, making it an attractive diversifier for portfolios.

"Additionally, cat bonds continue to see more attractive spreads compared to corporate bonds with the same ratings, which has been the case for over five years. This is because this asset class requires intensive sourcing and analysis capabilities, is less liquid than the general corporate bond market and comes with a premium. We believe that this, coupled with the low correlation to other assets and the wider market environment, make ILS a solid choice for portfolio diversification."

The opinions expressed here are the views of the author and do not constitute investment advice. This is not a recommendation to purchase, sell or subscribe to financial instruments, an offer to sell investment funds or an offer of financial services.

 

About AXA Investment Managers
AXA Investment Managers is an active, long-term, global, multi-asset investor focused on enabling more people to harness the power of investing to meet their financial goals. By combining investment insight and innovation with robust risk monitoring, we have become one of the largest asset managers in Europe with ambitions to become the chosen investment partner of investors around the world.  With approximately €679bn in assets under management as of end June 2016, AXA IM employs over 2,350 people around the world and operates out of 29 offices in 21 countries. AXA IM is part of the AXA Group, a global leader in financial protection and wealth management.

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This document is aimed solely at the media and is for information purposes only. It must not be forwarded to retail investors under any circumstances. The opinions expressed here are the views of the author and do not constitute investment advice. This is not a recommendation to purchase, sell or subscribe to financial instruments, an offer to sell investment funds or an offer of financial services. This press release is as dated. They do not necessarily represent the views of any company within the AXA Investment Managers Group and may be subject to change without notice. This does not constitute a Financial Promotion as defined by the Financial Conduct Authority and is for information purposes only. No financial decisions should be made on the basis of the information provided.

AXA Investment Managers UK Limited is authorised and regulated by the Financial Conduct Authority. AXA Investment Managers UK Ltd. Registered office 7 Newgate Street, London, EC1A 7NX. Registered in England NO 1431068.

Contacts
Tuulike Tuulas
+44 20 7003 2233
Tuulike.Tuulas@axa-im.com
Amy Butler
+44 20 7003 2231
Amy.Butler@axa-im.com
Jayne Adair
+44 20 7003 2232
Jayne.Adair@axa-im.com