UK-based HANetf has partnered with insurance-linked securities investment manager King Ridge Capital to launch what it claims is Europe’s first catastrophe bond ETF.
The KRC cat Bond Ucits ETF will be listed on the London Stock Exchange, Xetra and Borsa Italiano and managed by King Ridge Capital.
It will invest in a portfolio of cat bonds that transfer natural disaster risk from insurers to capital markets.
As the severity and frequency of extreme weather events have increased, the catastrophe bonds market has similarly increased in size.
They are seen as instruments that offer returns uncorrelated to equities and bonds with current yields typically ranging between 8% and 10%.
“Catastrophe bonds have grown into an important segment of global fixed income, offering return drivers that are fundamentally different from traditional markets,” said Hector McNeil, co-founder and co-CEO of HANetf.
“In an environment where investors are seeking uncorrelated income and robust diversification, this type of exposure can play a meaningful role in portfolio construction.”
