The opportunity

Catastrophe bonds are one of the largest and most developed sectors of the Insurance Linked Security (ILS) market. They are debt securities that pay a floating rate coupon and return principal to the holder if there is no triggering catastrophe during the risk period. This is one of the few genuine alternative asset classes. It is fundamentally uncorrelated with the performance of share and bond markets. With long-term returns of cash +4.5% p.a3, the Fermat ILS Yield Fund has attracted strong interest from investors seeking to diversify their portfolios.

About the manager

Fermat was formed in 2001 and is owned entirely by its founding partners. Fermat is a specialist investment manager with US$5.9billion assets under management and 16 years’ experience managing catastrophe risk portfolios4. Senior members of the Fermat investment team have active experience in catastrophe risk dating back to the market’s inception. Fermat’s state-of-the-art modelling systems and methodologies give it the ability to comprehensively determine the impact of a new addition to a portfolio. A fully transparent view of the risk of a diversified portfolio is a key driver of allocation changes.

About the strategy

Fermat invests in a portfolio of catastrophe bonds and other Insurance Linked Securities (ILS) that are primarily linked to natural events such as earthquakes, hurricanes and windstorms. Fermat’s investment process centres on extensive due diligence and sophisticated proprietary risk modelling and pricing analysis. It is designed to evaluate the investment characteristics of each ILS and to optimise the portfolio of securities held by the Fund.

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1. S&P/ASX200 Accumulation Index from March 2012 to June 2018. Return to the reference

2. Performance figures are presented for the Fermat ILS Yield Fund (the Fund) Class W on a net, pre-tax basis and assume the reinvestment of distributions. Past performance is not an indicator of future performance. The first investment in the Fund was made on 8 Feb 2012 and the Inception Date for the calculation of the Fund's performance is 1 March 2012 notwithstanding the first investment in Class W of the Fund was made during April 2013. Inception performance is calculated net of Management Costs and Performance Fees applicable to Class W of the Fund. Return to the reference

3. Bloomberg AusBond Bank Bill Index, formerly called the UBSWA Bank Bill Index until Bloomberg acquired the UBS Australia Bond Index Family in 2014. Return to the reference

4. Fermat Capital Management is exempt from the requirement to hold an Australian Financial Services License under the Corporations Act 2001 (Cth) in respect of the financial services it provides to Wholesale Clients, and is not licensed to provide financial services to retail clients, in Australia. Fermat Capital Management is regulated by the Securities and Exchange Commission of the United States of America (US) under US laws, which differ from Australian laws. Return to the reference