Blue Capital Alternative Income – Wind blown but still standing
Blue Capital Alternative Income’s (BCAI’s) net asset value declined by 24.8% during 2017 (including dividends). BCAI’s manager says that the 2017 Atlantic hurricane season, which accounts for most of the fall, was perhaps a one in 33-year event and that BCAI’s losses are in line with its internal projections for such a scenario. BCAI now has less capital to deploy although, with insured losses estimated by Munich Re at $135bn globally, this also applies to other reinsurers. This has resulted in increased rates (prices) for the January 2018 reinsurance contract renewal season and the manager projects an 8%-13% return for 2018.
LIBOR+8% target returns
BCAI aims to offer investors target returns of LIBOR+8% by investing in a broad range of reinsurance risk diversified by risk type, geography and peril. It currently invests in just over 1,400 different contracts from a variety of customers. No one relationship currently supplies more than 36% of invested assets for the portfolio.
The reinsurance industry is a largely US-dollar denominated one, so the fund’s returns are thus in US-dollars and therefore can be affected by the GBP/USD exchange rate for UK-based investors. Sterling investors do face a currency risk, therefore. The fund’s expenses are dollar denominated.
BCAI : Blue Capital Alternative Income – Wind blown but still standing