The Auckland Future Fund (AFF), a New Zealand based investment entity that was established in 2024 as part of Auckland Council’s long-term plan, can now add catastrophe bonds to its nascent portfolio as its governing board approved an investment policy that includes cat bonds as an allowable alternative asset class.The Auckland Future Fund (AFF) has been established to manage financial investment for the benefit of the current and future communities of the Auckland region, with a goal of protecting the value of intergenerational financial investments and add diversity by investing across different entities, sectors and locations.The Auckland Council governing board last week signed off on a draft Statement of Investment Policy and Objectives for the fund, as it moves towards making its first investments for the portfolio.Back in August, following a global search and competitive tender process, the board of the AFF appointed Vontobel Asset Management AG as its global investment manager, giving that firm responsibility to manage $1.3 billion in funds on behalf of Auckland Council.

Mayor Wayne Brown said at the time, “The Auckland Future Fund will diversify our investment risk while also providing an annual distribution to the council for additional funding for council services and infrastructure and reduce reliance on rates – that’s exactly why we did this.” Lead Councillor Christine Fletcher added, “This is a significant final milestone in the establishment of our Auckland Future Fund, and there is a strong expectation to see the fund being actively managed for the long-term benefits of Aucklanders and to help lessen the rates burden on Aucklanders.” The AFF had been capitalised with proceeds from the sale of Auckland Council’s shares in Auckland International Airport Limited (AIAL) in December 2024, which was valued at $1.31 billion at July 31st 2025.That capital will be put to work in accordance with the investment policy of the AFF and with catastrophe bonds named as an allowable alternative asset class, it appears this regional future fund for Auckland could become an allocator to the insurance-linked securities (ILS) asset class.With the Auckland Future Fund established as a trust and an initial policy to define how to diversify the investment portfolio approved, the next step would appear to be allocating capital to meet the fund’s long-term targets.

The AFF will have an annual return-target of 7.24% net of fees and costs and distribute 5.24% per annum, while maintaining the inflation adjusted value of the portfolio.The goal is for the fund to be well-diversified, using alternative investments to improve diversification, but with prudential limits on specific asset classes.The AFF also recognises that alternative asset classes can also deliver better risk-adjusted returns, while it intends to take a long-term view so it can maximise those kind of opportunities.

Catastrophe bonds are explicitly named as one of the alternative asset classes included in the initial Statement of Investment Policy and Objectives for the fund, and it appears an external manager would be utilised, with investment advisors and Vontobel providing oversight and input to help the AFF in making allocations to such alternative asset classes.For catastrophe bonds, the investment policy states that a neutral strategy for the asset class would be an allocation of 3% of fund assets, but the policy also shows that this could be anything from a minimum of zero percent, to as much as 5% of assets.These tactical ranges simply define what is allowable under the policy.

While there’s no guarantee the AFF will make a cat bond investment allocation, the fact the asset class is named in its investment policy suggests there is a strong probability that it will, once allocations begin to be made.The overall alternative investment allocation must not make up any more than 20% of the overall fund at any one time, the policy also states.Also suggesting that a cat bond allocation is likely to be part of the Auckland Future Fund as it deploys, is the fact the investment policy specifies a benchmark for the asset class, adopting the Swiss Re Cat Bond Total Return Index for this purpose.

It appears that allocations may be made at any stage from now, with the approval of the investment policy opening the way for investing to begin.But there will be a process of due diligence and manager selection that needs to be undertaken, so it could still be a while before the Auckland Future Fund makes its first catastrophe bond investment..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.