Catastrophe bonds are increasingly gaining ground with institutional investors and provide a compelling source of diversification and income at this time, according to Martin Rea, Senior Consultant at JANA Investment Advisers Pty Limited.
Writing in a recent article in the Journal of Superannuation Management, Rea explains that in an environment where “traditional beta is less reliable and economic headwinds persist” the catastrophe bond asset class looks increasingly attractive to large investors such as superannuation funds or pensions.
Cat bonds are “a rare example of true non-correlation”, Rea said, making their risk-return profile unique and of course meaning they remain detached from financial market volatility, such as we have been seeing in recent days and weeks.
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