Investors
Investors choose to invest in catastrophe bonds because their return is largely uncorrelated with the return on other investments in fixed income or in equities, so cat bonds help investors achieve diversification. Investors also buy these securities because they generally pay higher interest rates (in terms of spreads over funding rates) than comparably rated corporate instruments, as long as they are not triggered.
Key categories of investors who participate in this market include hedge funds, specialized catastrophe-oriented funds, and asset managers. Life insurers, reinsurers, banks, pension funds, and other investors have also participated in offerings.
A number of specialized catastrophe-oriented funds play a significant role in the sector, including Credit Suisse, Juniperus Capital, AXA Investment Managers, Fermat Capital Management, Nephila Capital, Anchor Risk Advisors, Clariden Leu and Twelve Capital. Several mutual fund managers also invest in catastrophe bonds, among them Oppenheimer Funds, Pioneer Investments, TIAA-Cref, and PIMCO.
Read more about this topic: Catastrophe Bond