Bermuda’s Nephila plays leading role in ILS market for pensions
A Bermuda investment manager is at the forefront of marketing insurance linked securities directly to pension funds.
Overseas pension funds are increasingly turning to ILS and catastrophe bonds — once considered an exotic investment for specialists only — that bet on the likelihood of a natural disaster, in a search of higher yield and returns not correlated to the rest of the market.
Nephila Capital currently has more than $9 billion in assets under management and “our strategy is marketed to pension funds, among other investors”, a spokesperson told The Royal Gazette.
Nephila employs 61 employees globally with its largest office in Bermuda in Victoria Place where it has grown to 45 staff, she said.
Pension funds accounted for 14 percent of direct investment in new cat bonds issued last year, from zero in 2007, according to data from re/insurer Swiss Re.
“Few insurance fund managers have successfully marketed direct to pension funds. The most successful is probably Nephila Capital, which is 24.9 percent owned by private-equity giant KKR,” an article in Financial News this week said.
The article noted the entry of Schroders, one of the UK's biggest pension fund managers, into catastrophe bonds was “a significant step in the asset class moving towards the mainstream of UK pension fund investment”.
“One of the biggest roadblocks to investment by pension schemes has been price,” the article said.
“Many cat-bond fund managers charge hedge-fund like fees of around two percent of assets plus 20 percent of any gains, which many consultants view as too steep.
“That is one reason that Towers Watson, the pensions consultancy, teamed up with Nephila Capital in 2011 to create a more passively-managed strategy.”
Nephila Capital, an investment manager specialising in reinsurance risk, was founded in 1997 in London as part of Willis Limited.
As part of its growth strategy, the company relocated to Bermuda in 1999 in order to establish a local presence and to deepen existing relationships in the world's largest catastrophe reinsurance centre.