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MLC Asset Management, an Australian investment arm of Insignia Financial Group, has launched a new multi-manager insurance-linked securities (ILS) fund offering, the MLC Reinsurance Investment Fund, which marks the firm’s first dedicated ILS fund strategy that is being offered to institutional investors.
MLC Asset Management has been an allocator to insurance-linked securities (ILS), both catastrophe bonds and private reinsurance strategies since 2007.
In this time the investment manager has allocated to ILS products from its range of multi-asset and alternative funds, with reinsurance-linked assets making up a component of many of these.
The driver has been adding diversification and a source of relatively uncorrelated returns, which has worked well for MLC and its clients over the years.
Now 17 years into investing in ILS and reinsurance, MLC’s track-record has been impressive with a 8.3% annual return (in AUD) over that period. The strategy has also outperformed cash for 16 out of those 17 years.
As a result, MLC has around AU $3 billion allocated to the ILS asset class across its strategies and has now opened up this track-record to other Australian institutional investors looking for a locally managed, dedicated ILS fund strategy.
Launched for 2025, the MLC Reinsurance Investment Fund has been seeded with approximately AU $250 million in capital by Australian institutional investors.
Taking a fund of funds approach, this multi-manager portfolio is the first time MLC has packaged its alternatives expertise for the external investor market in Australia and the company sees it as an important milestone in the growth of the alternatives segment of its business.
Artemis spoke with Gareth Abley, Co-Head of Alternatives at MLC Asset Management, to learn more about the first dedicated ILS fund launch by the company.
“We’re out essentially offering that multi-manager ILS capability we’ve developed in-house to other people who may find it beneficial to piggyback off what we’ve done and what we’ve learnt over the last 17 years,” Abley explained.
Discussing the broader ILS strategy and how that’s developed at MLC, Abley said, “It’s been a remote-risk oriented strategy since launch and has generally done pretty well, so we’ve made money every year in the last 17 years.
“It’s been a strategic allocation and the track record has been good, which has meant that our stakeholders have been comfortable sizing up when it makes sense to size up, such as in the last couple of years when spreads have widened. It’s generally been a success story asset class for us.”
On why now, for the launch of the first dedicated ILS fund for external clients, Abley said that encouragement has come from both clients and internal stakeholders at MLC.
“The business encouraged us to see if we can commercialise these capabilities, so we’ve recently created a commingled fund which we’ve seeded with $250 million of external capital from an institutional investor. So we’re now out essentially offering that multi-manager capability.”
Discussing the MLC Reinsurance Investment Fund strategy, Abley said, “This specialist reinsurance fund allocates across quota shares, collateralized reinsurance and cat bonds.”
Abley said there are four separate ILS fund strategies currently being allocated to through the MLC Reinsurance Investment Fund, “We know that manager dispersion in the asset class can be very wide, even for strategies with ostensibly similar EL profiles. Plus our view is that the nature of remote risk reinsurance is that luck can dominate skill over many time periods. So if an investor wants to capture the risk premium reliably we think multi-manager is the best way to do that.”
Further explaining that, “It’s designed to play across the ecosystem, based on where the relative value is most attractive and using different specialist managers, some of whom have more expertise in certain areas.
“Some are more focused on collateralized reinsurance, some quota shares, some catastrophe bonds, so that’s the way we’ve managed our ILS strategy it for over a decade, having the multi manager approach and playing across public and private instruments.”
Fund of fund strategies are less common in ILS still, in part because of certain challenges presented by fee structures and the costs of allocating across multiple strategies.
But Abley feels that with MLC’s scale already in ILS and its long relationships with some of the leading ILS fund managers, it has constructed a compelling offering for institutions.
“I think that’s part of the value proposition because we’re a very big investor who’s been around the ILS asset class for a long time,” he explained.
“As you can imagine, the mandates we’re running with, you know with $3 billion plus aggregate AUM, are pretty big. As well as this scale, we’re a long-term investor in the asset class, and the stability of our capital has strategic value to our counterparties. All this means win-win commercial arrangements with high quality counterparties. So we think the maths for external investors – in terms of portfolio quality, outsourced multi-manager and look through fees is really attractive.
“Investors can get instant diversification, with access to both the public and private segments of ILS, while the multi-manager approach means the fund will generate broad reinsurance returns from a single allocation,” Abley stated.
MLC launches multi-manager ILS fund, its first dedicated reinsurance strategy was published by: www.Artemis.bm
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