GAM Star Cat Bond

Fermat Capital Management was established in 2001 and manages the GAM Star Cat Bond fund and stands as a recognized leader in the insurance risk and catastrophe bond investment sectors. Currently managing assets worth c. $9.7bn, its team comprises experts in insurance-linked securities and risk modelling. The team believes returns from catastrophe investments are driven by a fundamental mismatch between reinsurance regulation and the demand for insurance created by rapidly rising coastal and urban concentrations of economic activity worldwide. They believe that through active bond selection and management, they can construct a portfolio of cat bonds with a risk-return structure that aligns with the best paying reinsurance risks, and therefore capture alternative beta at the optimal risk-return level. Their approach focuses on 'peak peril' exposures while maintaining a rational level of diversification. The team's process centres on extensive due diligence, deep market understanding and sophisticated risk modelling. In order to price and select those ILS that are taken forward for consideration, the team uses sophisticated risk modelling tools to help understand each bond's true risk. They seek to build a portfolio containing only clearly modelled, well-compensated risks that are supported by quality data. The resulting portfolio of approximately 150-200 positions is constructed on a bottom-up basis, with those bonds providing the most attractive portfolio risk/reward impact being selected for inclusion.