AXA IM Wave Cat Bond Fund

Investment Objective

Insurance linked securities (ILS) are a good diversifying tool as their returns depend mainly on the occurrence of natural catastrophes rather than economic factors. A diversified ILS portfolio is key to investors as the loss distribution profile of an ILS (high severity, low frequency) means a natural catastrophe can trigger a total loss of the principal on any single asset.
AXA IM believe successful investments in ILS can be achieved through careful remodeling of each transaction combined with a thorough analysis of the market, as well as the transaction's structure. 

Latest Meeting Note

Meeting 15 Mar 2023

The AXA Cat Bond fund was launched in January 2017 but as a team and firm, they have a more extensive history investing across this asset class, with the ILS team launched in 2007. A catastrophe bond (Cat Bond) is a bond which transfers ...

The AXA Cat Bond fund was launched in January 2017 but as a team and firm, they have a more extensive history investing across this asset class, with the ILS team launched in 2007. A catastrophe bond (Cat Bond) is a bond which transfers catastrophe insurance risk from insurers, reinsurers or corporates to the capital markets. The team believe ILS offer an attractive risk premium relative to expected losses in addition to diversification. In terms of investment process, they rely on three pillars. Qualitative analysis looks at the deal structure and features around a Cat Bond and helps to understand the (re)insurance risk. This is followed by quantitative risk modelling, using proprietary internal models to determine expected losses while assessing correlation and diversification benefits. And finally, evaluation of pricing and spread is key to the investment decision, to ensure they are receiving a return commensurate for the underlying risk. AXA are currently bullish on the asset class as spreads widened significantly in 2022 with hurricane Ian exacerbating this trend into 2023, and therefore expect spreads to remain high in the next months. Furthermore, broader factors should ensure that the imbalance between offer and demand should remain high in the near term and resultingly, so should spreads. Finally, Cat Bonds can play a useful role in a more inflationary environment as Cat Bonds are effectively floating rate notes and are thus impacted positively by the risk-free rate increases linked to the current inflation context.

Performance

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD
2023 0.5 0.3 1.0 0.3 0.7 0.9 0.8 0.7 1.0 0.2 0.1 0.8 0.3
2022 0.4 0.5 0.2 0.1 0.8 0.2 0.7 0.9 0.3 0.5 0.4 0.9 0.1

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