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Alternative Market Briefing

Eurekahedge ILS Advisers Index ended 2018 down 2.93% in second loss year

Friday, January 18, 2019

Laxman Pai, Opalesque Asia:

The Eurekahedge ILS Advisers Index, that covers insurance-linked securities (ILS) hedge fund strategies, ended 2018 down 2.93%, recording its second consecutive year of losses after 2017, during which the index slumped 5.60%.

The catastrophic losses incurred by Hurricane Florence in September and Hurricane Michael in October weighed on the ILS fund managers' returns throughout the fourth quarter of the year.

Looking at 2018 returns, ILS fund managers trailed behind government bonds, which returned 0.99% during the year, while outperforming global equity markets which slumped into the red over concerns regarding the global trade tension, Fed rate hikes and slowing global economic growth.

Looking over the last three and five year periods, ILS fund managers failed to generate competitive annualised returns compared to their hedge fund peers utilising other strategies. This is largely caused by the significant losses they suffered during the two recent Atlantic hurricane seasons, which wiped out nearly two years' worth of gains and sent the index value below its February 2015 level.

Over a longer period of 10 years, the Eurekahedge ILS Advisers Index generated a Sharpe ratio of 1.42, trailing behind the 2.60 Sharpe ratio posted by the Eurekahedge Hedge Fund Index, but outperforming both the MSCI AC World IMI Index and the Merrill Lynch Global Government Bond Index II, which posted Sharpe ratios of 0.96 and 1.18 respectively.

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