ILS yields driving investor demand post-pandemic
The ILS market is producing the best yields the market has seen in nearly 10 years at 8 percent, and Daniel Ineichen, the head of fund management ILS at Schroders, has a bullish outlook.
The ILS market has performed “extremely well” during the coronavirus pandemic with attractive yield and spread levels driving a spike from both buyers and investors as the market responds to the challenges posed by Covid-19, according to Daniel Ineichen, the head of fund management ILS at Schroders.
Speaking to The ReInsurer, Ineichen offered a bullish outlook on market dynamics, the ILS sector is currently producing yields of 8 percent – the most attractive the executive has seen in seven to eight years.
“From a performance perspective, the ILS market has performed extremely well during the pandemic, in particular compared to most of the other asset classes,” he says.
“We are talking about yields of 8 percent in most of the balanced strategies, whereas many other asset classes have had a V-shaped recovery and they’re expensive at the moment.”
It’s in times of economic crisis that investors feel the benefit of holding the asset class. He says that Insurance-linked Securities are an almost “carefree package” for investors who are typically absorbed with their main asset classes and the main risks in their portfolios during a financial crisis.
“During these difficult crisis times, that’s when the asset class sees the full benefit of holding it,” he says.
“Typically it has a very strong performance in these
difficult times, that’s one of the reasons why it’s popular
among institutional investors and also intermediary
investors. “We are on target to post quite a strong
year despite the corona crisis,” adds Ineichen.
Loose monetary policies and the continued
suppression of interest rates have also served to
drive interest in ILS as investors look for returns,
Ineichen says, with the ILS sector offering a “highly
attractive” proposition for both old and new
investors in the space