Above average number of natural disasters impact on Blue Capital – the NAV of Blue Capital Alternative Income (BCAI) was hit by a higher than average occurrence of natural disasters during the year to 31 December 2017.
please see our note on Blue Capital Alternative Income published on 13 February entitled “Wind blown but still standing”
Blue Capital Alternative Income Fund provides investors with the opportunity to access the global catastrophe reinsurance market, and to invest in an alternative asset class whose returns have historically been largely uncorrelated to those of other asset classes including global equities, bonds and hedge funds. It aims to offer investors target returns of LIBOR+8% via a master fund (an underlying special purpose vehicle used to hold the investments), that invests in a broad range of reinsurance risks diversified by risk, geography and peril. It invests in over 1,500 different contracts from a variety of customers. The reinsurance industry is a largely US-dollar denominated one and so the fund’s returns are earned in US-dollars.
The company’s total NAV return for the year was -24.9%. Industry losses amounted to approximately $135 billion during 2017 with hurricanes Harvey, Irma and Maria, the California wildfires, the Mexico earthquakes and other events accounted for $330 billion in overall economic losses, the second highest figure since 2011. Despite these significant losses, the company distributed $0.0714 per share, which represents a dividend yield of LIBOR plus 6%. for the period ending 31 December 2017. The losses in 2017 were within modelled expectations given the events that occurred.
However, it is worth noting that the portfolio has outperformed other insurance linked securities over its first four years of operations with a rise in NAV of 8.1% since inception. This is an annualised return of 1.6%. per annum. The company has delivered a positive NAV return in 90% of months since inception.
BCAI : Above average number of natural disasters impact on Blue Capital