Lombard Odier Investment Managers (LOIM) is hiring Gregor Gawron and a colleagues from Zurich-based investment managers Dynapartners to create its own catastrophe (CAT) bond and Insurance-Linked Strategies (ILS) team.
LOIM said the three-person ILS team it had lured would offer institutional clients another asset class which had low correlation to mainstream assets, and would help it launch its own ILS product.
Jan Straatman, LOIM’s CIO, said: “CAT bonds are uncorrelated to other risks, including economic and capital market events, while the 4% to 6% returns on offer remain attractive.”
The overall ILS universe is nearly $60bn (€54.6bn) in size and growing steadily, he said.
Insurance-linked securities transfer risk from the insurance market to the capital market, with insurers typically sponsoring catastrophe bonds, or CAT bonds, which are usually linked to natural disasters such as hurricanes.
If the insured catastrophe fails to happen, bondholders receive their capital at the end of the term plus a coupon, but if disaster strikes, the insurer uses the bond capital to meet claims.
LOIM said it had hired Gawron along with Simon Vuille and Marc Brogli to form the team.
Gawron led the CAT bonds and ILS offering at Dynapartners and before that at Falcon Private Bank, LOIM said.
He was previously a portfolio manager in the ILS team at RMF/Man Investments, where he worked closely with Vuille and Brogli.
Brogli comes to LOIM from Dynapartners and Vuille joins the firm after working at a single family office.
The new ILS team will be based in LOIM’s Zurich office, and will report to Straatman.
LOIM said Gawron and his team used their own particular approach aimed at putting together the best portfolios of ILS, diversifying the securities as much as possible across different risk types and different regions.
Straatman predicted fixed income would become more volatile and subject to rising rates over the next two years.
“It will be crucial to add active and high conviction strategies which protect clients better against rising rates, instead of the traditional market-cap based strategies,” he said.
CAT bonds could meet these criteria with a higher starting yield and floating rate coupon, he said.