In a volatile market environment when some hedge fund and alternative strategies have suffered, UBS Asset Management’s team sees catastrophe bonds as one asset class worth increasing allocations to, given it the carry they can provide remains relatively attractive compared to other investments in credit and fixed income.
The UBS Unified Global Alternatives team, which also houses hedge fund solutions and allocations to third-party managers, has been particularly active through recent years in adjusting client and strategy portfolios to take advantage of opportunities across investment asset classes.
The team has been allocating to reinsurance through catastrophe bonds and other types of private insurance-linked securities (ILS) for some time, finding the relatively uncorrelated returns appealing for its clients, while also seeing the asset class as one it had high conviction on during the period of very high spreads and returns.
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