A recent article in the mainstream financial press has caused some consternation among catastrophe bond fund managers and end-investors allocating to those strategies, as while it correctly highlighted that cat bond fund returns are down year-on-year in 2024, it failed to discuss the very good reason why 2023’s elevated returns were unlikely to be repeated.
2023 saw the total-return of the outstanding catastrophe bond market hit a record high of 19.69%, according to full-year data from the Swiss Re Cat Bond Performance Indices.
Catastrophe bond funds in the UCITS format averaged 14.88% for the full-year return in 2023, which is perhaps a better benchmark for what was typically achievable in the market for any larger or more diversified cat bond fund strategy.
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