Switzerland based pension fund Nest Sammelstiftung, or the Nest Collective Foundation, saw catastrophe bonds and insurance-linked securities (ILS) as one of its best investment asset classes in performance terms in 2024, benefiting from over 20% across its cat bond and reinsurance allocations.Nest Sammelstiftung positions as an ecological-ethical pension investor, adopting sustainable investment strategies, one of which is the inclusion of natural disaster risk via some cat bond and insurance-linked securities (ILS) fund strategies.Nest allocates to two natural catastrophe focused ILS funds, one a reinsurance focused fund under Swiss Re’s ILS platform, the other a pure catastrophe bond offering from Twelve Securis.Alongside these managers, Cambridge Associates is also listed as assisting Nest with its ILS investment strategy.

The Swiss pension investor values its investment decisions on their ecological and ethical criteria, as well as their potential to drive returns and when it comes to insurance-linked securities (ILS) their ability to drive uncorrelated returns are also seen as key to its allocation.Looking back on calendar year 2024 performance, the Swiss pension investor said, “ILS in particular, can look back on an exceptionally good year.” Further noting that, “ILS exhibit a comparatively low correlation compared to other asset classes such as equities, bonds, and real estate.This means that the performance of ILS is largely independent of traditional investments.

This makes them a particularly good contribution to portfolio diversification and thus to risk reduction.” The Nest pension benefited from market conditions in 2024, saying, “The returns achieved in recent years also speak for themselves: Nest’s ILS portfolio achieved a return of around 5% in 2023, while in 2024 it even exceeded 20%.” But qualified this by saying, “Despite the good return, ILS remains a complex asset class with very specific risks.Nest therefore invests in this type of investment in a targeted manner and through experienced external partners.In this way, ILS contributes optimally to risk diversification and long-term positive return development.” In fact, it appears the catastrophe bond and insurance-linked securities (ILS) investments in Nest’s allocation delivered a return of approximately 22% in 2024.

One of Nest’s ILS investments is to the Swiss Re Insurance-Linked Investment Management Ltd.(SRILIM) managed Core Nat Cat Fund strategy.This fund strategy allows institutional and designated professional investors to proportionally participate in Swiss Re’s core natural catastrophe (nat cat) book.

At the end of 2024, the Swiss Re Core Nat Cat Fund allocation was valued at CHF 59 million, but this had risen to CHF 77 million by the end of 2024, a roughly 30% increase in the year.The other main ILS investment by Nest is to the Twelve Securis managed Twelve Cat Bond Fund, that managers UCITS strategy which, as we reported recently, surpassed $4 billion in assets recently.The Twelve Cat Bond Fund allocation was a CHF 54.2 million investment at the end of 2023, but by the end of 2024 this had grown by around 24% to CHF 67.5 million, a roughly 24% increase.

Nest has a small allocation to the Leadenhall Capital Partners Life ILS Fund, of CHF 7.2 million at the end of 2024 and a small allocation to an AXA Liabilities Managers strategy that we believe may be run-off focused.In total, the investments into cat bonds and ILS strategies accounted for around 3.6% of assets at the end of 2024, which equates to almost CHF 154 million (almost US $170 million).The pension investor has an allocation allowance of up to 5% of its assets for ILS, so has room to grow in the asset class if it chooses.

That was up from the almost CHF 130 million a year earlier, with the cat bond and reinsurance allocations growing strongly thanks to the returns those investments had delivered, while the life and run-off allocations declined slightly.It was a particularly good year for many institutional investors that allocate to ILS in 2024, which Nest benefited from significantly, as its ILS investments came second only to its global equities positions, in terms of returns they generated.It doesn’t appear that any fresh allocations or top-ups to them were made in the calendar year, with the strong performance the main driver of increased ILS investment values.

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