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Dexion Capital launches insurance-linked closed-end fund

Monday, April 30, 2012

Ana Haurie
Opalesque Industry Update - Alternatives specialist Dexion Capital has announced the proposed listing of a new investment company, DCG IRIS Limited, on the London Stock Exchange.

Offer highlights include:

  • DCG IRIS Limited (the ‘Company’) is a proposed new London-listed, closed-end investment company seeking attractive returns from insurance linked strategies (‘ILS’). The IPO is scheduled to close mid June 2012
  • The Company will access a highly diversified portfolio of catastrophe risks with a target net return of LIBOR +5% to 7% and annual volatility of 2 to 4%, by investing in CS IRIS Low Volatility Plus Fund (the ‘Master Fund’), managed by Credit Suisse
  • The Company has an initial dividend target of 5% per annum, payable quarterly
  • ILS offers substantial diversification benefit with low correlation to financial markets and other alternative investment strategies
  • Strong discount controls
  • Credit Suisse manage a portfolio of catastrophe risks with unique risk/reward characteristics which typically involve synthetic triggers, reducing complexity and providing transparency so that losses can quickly be assessed more quickly and losses typically expected to arise only as a result of very large events
  • Publicly traded cat bonds may also be used, typically 10-30% of the portfolio
  • A high degree of portfolio diversification is provided through the range of uncorrelated catastrophe event exposures i.e. hurricanes, earthquakes, aviation, marine and typhoons
  • Transactions are collateralised by a highly-rated bank (currently AAA) and minimal credit risk is taken with insurance counterparties
  • The Credit Suisse ILS investment team has long track record in ILS, with US$3.7 billion in AUM (as of March 2012). It has a total of 24 fully dedicated employees
  • A presence in Zurich and London gives access to main reinsurance markets
  • The ILS team receives fully integrated support from Credit Suisse with independent control functions including risk management and compliance provided by Credit Suisse
Dexion Capital plc has been appointed sole financial adviser and placing agent to the Company. Dexion Capital Guernsey Limited (DCG) will be investment manager to the Company.

Ana Haurie, Group Managing Director of Dexion Capital said: “The catastrophe reinsurance market offers investors a diversified source of returns which are attractively priced at a time when traditional portfolio diversifiers such as government bonds and gold are fully priced with high potential risk. The experienced Credit Suisse ILS team are specialist risk managers with extensive knowledge of meteorology and insurance, and a long track record in this field. We believe that investors will quickly grasp the benefits of this opportunity with increasing numbers of institutions entering the space”.

Press release

bc

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