Top tier of ILS firms add 1.7% in H1 to reach $77.5bn of AuM at 1 July
  • X
  • LinkedIn
  • Show more sharing options
  • Copy Link URLCopied!
  • Print
  • X
  • LinkedIn
© 2024 Insider International Limited, company number 15236286, 4 Bouverie Street, London, EC4Y 8AX. Part of the Delinian Group. All rights reserved.

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Top tier of ILS firms add 1.7% in H1 to reach $77.5bn of AuM at 1 July

trwb ils firms top tier.jpg

The combined assets under management (AuM) of ILS funds sized at more than $2bn increased by 1.7% to $77.5bn as of mid-year, up from $76.2bn since 1 January, according to Trading Risk’s latest ILS AuM data survey.

The top funds’ AuM has hovered at close to the $80bn mark over the past two years, during which time increases at the strongest-growing funds have broadly offset declines at others in the peer group.

The estimate of total AuM for the ILS industry more or less held steady at $98.6bn at the half-year point, up 0.6% from $98.0bn as of January, as cat bond market inflows provided a counterbalance to challenges in other segments.

It’s worth noting, too, that retained earnings are likely to help boost AuM over the course of 2023, with the full extent of this new dynamic still to play out over the second half.

AuM rises and falls in 2023

Looking at funds’ performance by AuM during the six months to 1 July, Twelve Capital has posted the fastest growth, up 29% to $3.4bn, while Pillar was close on its heels, up 26% to $3.9bn.

These gains were off relatively smaller bases, with larger firm Fermat adding the most AuM in dollar terms, up $1.1bn to $9.7bn in the past six months.

Many of the other $2bn+ funds in the growth zone this year report having raised funds for cat bond strategies. They include Scor, which added $300mn, including inflows to its Atropos cat bond fund, and RenaissanceRe, which added $350.5mn in Q2, including $150mn in a newly formed segregated account focused primarily on bonds.

Stone Ridge added 8% to its cat bond focused High Yield Fund, to reach $1.7bn, and raised $250mn of largely cat bond-focused ILS capital in its multi-strategy Diversified Alternatives fund, in the six months to 30 April.

Meanwhile Schroders secured $70mn from two clients for its new Caymans-domiciled cat bond fund open to US investors.

Nephila, LGT ILS Partners, Leadenhall Capital and Securis have posted AuM declines for the year so far, while Credit Suisse ILS recorded the largest drop in AuM, as new information on its reduced asset base emerged during the course of reporting on its combination with UBS.

Also in the first half, Pimco moved to shutter its ILS fund operations, which had around $774mn in AuM as of mid-2022, as Trading Risk revealed.

Growth since mid-2021

Over a longer two-year time horizon since mid-2021, the biggest gainers among the top tier of firms are Pillar, up 56%, Swiss Re, up 54%, and Neuberger Berman, up 45%.

Fermat, again starting from a bigger base, added the most in dollar terms over the past two years, up $1.7bn.

The heaviest market counterweight again came from Credit Suisse ILS, which dropped AuM by 52% to $2.5bn. Part of this decline reflected the sell-offs of Humboldt Re and then Kelvin Re to Marco, in deals in October 2021 and July 2023, respectively.

However, this apparently precipitate drop in AuM at Credit Suisse ILS is in fact more likely to have unfolded as a gradual decline over several years.

Among other AuM falls in the post-pandemic period, LGT ILS Partners, Nephila Capital, Securis Investment Partners and Leadenhall Capital Partners have all reported decreases of more than 20%.

This partly reflects the relative loss of momentum in fundraising for collateralised ILS strategies.

Dominance of $2bn+ funds 

Meanwhile, the portion of the ILS market comprising funds with $2bn+ of AuM stood at around 80% as of mid-year 2023. This equates to a high reached in 2018, after which the larger funds’ share of the ILS market dipped for a couple of years before returning to, and then staying at, the 80% mark from 2021.

The composition of the market across smaller and larger funds has shifted over the past decade, from the top funds comprising around 65% of the market in 2013, to closer to 80% in 2023.

Amundi, Integral ILS and Hiscox ILS are all on the cusp of joining the $2bn+ club, each having AuM that is hovering at $2bn or just below it.

Industry sources have said that the ILS market could be on course for more merger and acquisitions activity over the next couple of years, as firms look to bolster their positioning in a highly competitive fundraising context. However, it remains to be seen how much appetite there is on the purchasing side of the equation, given the complexities of taking over a fund versus the benefits on offer.

What will be the fresh market growth catalyst?

The question now is what could kickstart a new period of growth, or if AuM is likely to continue to plateau for a while longer yet.

RenRe CEO Kevin O’Donnell is of the view that the so-called denominator effect remains a challenge. This is where end-investor funds find themselves overweight alternatives because of mark-to-market losses elsewhere in the portfolio.

He told analysts on the firm’s Q2 earnings call: “What's going on with some of the more noteworthy allocators into ILS is their alternative allocation is still probably at the high end of where they'd like it.”

Independent growth

Meanwhile a wider-lens view of the sector suggests that independent funds are currently the group that is growing the most strongly.

The combined AuM of the 15 independent managers in Trading Risk’s analysis reached 32% of the total market as of 1 July. This group, which includes Fermat, Pillar, Twelve and Stone Ridge, have grown as a force in the market from around 16% of AuM in 2013.

They look to be slowly challenging the dominance of the reinsurer-backed specialists. The combined AuM of the 21 reinsurer managers made up 39% of the market total as of 1 July. This group has shrunk slightly as a piece of the market overall, from closer to 45% a decade ago.

Meanwhile the asset manager-owned firms, a group of 13 including Aeolus, Neuberger Berman and Schroders, stand for 27% of total market AuM, a share which has dropped over the past decade from 40% in 2013.

Gift this article