Deutsche Bank is planning to set up a catastrophe-bond hedge fund, in spite of the difficulties it faces in doing so due to new US regulations, Hedge Fund Alert reported.
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According to the article, Deutsche Bank is in the early stages of setting up a hedge fund which will invest in insurance and reinsurance linked assets including catastrophe bonds.
Deustche Bank, which has yet to begin marketing the fund, plans to seed it with $100 million, in spite of the restrictions placed on it by the Volcker rule, which strictly limits the amount that banks can invest in hedge funds.
The bank’s Asset & Wealth Management unit will run the new fund, with new re-hire Michael Amori as manager, according to the article.
During his first stint at Deutsche, Amori co-headed a “longevity markets” group within the bank’s corporate-banking and securities division. That role saw him arrange swaps designed to allow corporate pension managers to shed the risk that their beneficiaries would live longer than projected.
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By GlobalDataFunds like the one Deutsche is planning typically deal in less-exotic fare. Take catastrophe bonds, which are among their most common investments. Those instruments essentially act as short-term reinsurance products, allowing insurers to offload some of the risk that they would face major payouts if a natural disaster strikes a specific location during a given window of time.
The largest operators of hedge funds that invest in insurance-linked securities are Credit Suisse, with $4 billion to $5 billion at work in the sector; Fermat Capital, which runs about $4 billion; and the $8 billion Nephila Advisors, which sold a minority stake in its business to Kohlberg Kravis Roberts in January.
Napier Park Global Capital, which spun off from Citigroup this year, also is planning the launch of an insurance-focused vehicle, the publication added.
