Bermudian investment manager Members Capital Management has launched its first investment fund, MCM Fund I, a dual-denominated, commingled fund with a remote risk strategy of around 70% property catastrophe risk and 30% cyber risk.
The fund’s dual denomination means it can accept Fiat currency or USDC, a stablecoin issued by fintech firm Circle and pegged 1:1 to the US Dollar.
MembersCap has raised capital from Solana, Aptos and Cardano. The trio are FinTech firms that have developed their own digital asset/crypto currency ecosystems, and rank among some of the largest such firms by market capitalisation.
They either invested working capital into investment manager MembersCap or provided their own treasury capital for deployment through MCM Fund 1.
The size of the investments range from tens of thousands of dollars to tens of millions.
Investing in MCM Fund I is ‘on chain’: investors send stablecoin to the fund, and in return receive a token for their digital wallet that is representative of the value of their investment in the fund at any point in time.
The investment strategy of the fund, which launched on 1 July, is defensive and focused on remote risk, with an annual target return of 9%-12%. The strategy is positioned to provide access to diversifying reinsurance risk to a cohort of investors who are not currently familiar with ILS.
The cedants to the strategy include global reinsurers, Lloyd’s syndicates and ILS funds, with products spanning reinsurance and ILWs, including strategic and tactical buying.
The fund’s split of business at around 70% property cat and 30% cyber is expected to continue over time.
Use of the digital asset chain for investing results in a more streamlined administrative process, which has enabled a lower barrier to entry compared to conventional commingled ILS funds. The minimum subscription to MCM Fund I is equivalent to $50k, and investors still need to meet certain thresholds in terms of sophistication and/ or net wealth.
The collateral underpinning the deals is held in US dollars. Over time, and assuming cedant support, this could change so that digital assets are used to underpin some of the reinsurance obligations in the portfolio.
Initially, liquidity will be biannual subject to availability. Over time, there is potential for the tokenized shares in the fund to be traded in secondary markets.
The firm has partnered with Coinbase as a banking partner/digital custodian, Archax as tokenisation partner, Apex Group as administrator, and cyber underwriting firm Envelop Risk.
Tokenisation platform Archax already offers investment funds from the likes of Fidelity, BlackRock, L&G and State Street Global.
Lloyd Wahed, co-founder and CEO of MembersCap, said: “Every generation is presented with new technologies that unlock economic opportunity. To us, tokenisation and the blockchain represent access to better asset management for a different class of investor.”
Patrick Barrett, co-founder and COO at MembersCap, said: “Our investors – digital asset institutions, family offices, HNWIs – want to meet goals of resiliency and long-term sustainable growth. We’re seeing these investors view reinsurance as a core part of their portfolio for the first time.”
Ben Fox, co-founder and CIO at MembersCap said: “Our tokenised model enables a new cohort of investors to participate pari passu alongside large institutions in an uncorrelated asset class with a track record of reliable, attractive returns.”
MembersCap was licensed by the Bermuda Monetary Authority in June last year.