As part of our series looking at what firms did to win their accolades at the PP Investment Awards 2024, PP speaks talks to Leadenhall Capital Partners managing director for business development Alistair Jones about winning the Insurance Linked Securities Manager of the Year accolade.
What does it mean to win this award?
It's a fantastic achievement for Leadenhall to be recognised for its management of insurance-linked strategies (ILS). The award is testament to the experience, skill and hard work of the team and comes at a great time in an environment where ILS is producing some great returns and outcomes for pension funds and their members. Income from insurance premiums supports returns. This alternative source of return provides welcome diversification from cyclical markets. In recent years yields have been significant ranging from cash +7% per annum to cash + 17% per annum, which has largely been delivered. This is particularly helpful when valuations are looking stretched in both traditional equity and credit markets.
What do you believe sets you apart from your peers?
Client centricity: Leadenhall's approach places end investors at the core of the organisation's strategy, decisions and operations. We differentiate not only by our investment products but by the value and experience they provide.
Market leading reinsurance platform: Leadenhall has streamlined the collateral management behind ILS transactions, reduced overall transaction costs and provided more capital efficient ILS solutions to investors. This ultimately translates into better optimised risk adjusted returns for investors.
Stable team: Leadenhall has a very stable senior team, composed of ten managing partners who have worked together for many years. Their deep trust, cohesion, and shared experiences strengthen decision making, risk management and a culture of resilience even in the face of challenges.
Diverse range of offerings: Leadenhall provides investors with solutions across risk / return spectrums and reinsurance risk towers. The firm has a wide range of offerings and is versatile in meeting investors' specific preferences.
How do your investment strategies help pension schemes meet the challenges they face?
Yield: In today's markets credit spreads are very narrow. In an environment where DB schemes have been de-risking ILS offers significantly higher yields at similar levels of default to credit assets.
Genuine diversification: When economies deteriorate traditional assets such as equities, property and corporate bonds often correlate and fall together. In these scenarios ILS tends to deliver dependable returns. Cleary ILS markets can fall too if there are (re)insurance events but this tends to happen at different times to when there are financial market downturns.
Liquidity: Following the gilt market crisis of 2022 DB schemes have been hyper-focussed on liquidity to support their liability-driven investment (LDI) collateral needs. ILS can help here both with liquid tradable cat bonds and open-ended private placement funds.
Lower risk cashflow generation: The new DB Funding Code asks schemes that run on to be resilient to market shocks and to have low dependency on their sponsors. Consequently lower risk and diversified ILS strategies have been popular with their regular coupons and income being a bonus in helping pay pensions as they fall due.
Sustainability: For schemes taking a sustainable approach ILS offers a lot. It provides resilience protecting societies from climate events building them back in their times of need. These social benefits can be measured and targeted for investors which is often helpful in complement their environmental strategies.
How will you continue to improve your investment offering over the coming 12 months?
Many DB schemes have taken advantage of the opportunities in ILS and more continue to do so. However DC schemes have also now started allocating and over the next 12 months we expect more to do so. High yields and genuine diversification mean that ILS has relevance in DC members' accumulation, de-risking and decumulation phases. DC platforms can require frequent dealing and pricing even with the introduction of the new LTAF vehicles. Over the coming year we look forward to continuing to work and innovate with DC schemes so that all schemes can access the opportunities in ILS.
The winners of the 11th annual PP Investment Awards were announced at a reception in London on 20 November. To see the full list of winners and find out more about the awards, visit: www.investmentawards.co.uk
