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Cat bonds from an investor perspective

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The SEF Entropics Cat Bond Fund to be terminated. Asset manager Entropics will focus solely on its institutional management offering

SEF Entropics Cat Bond Fund is managed as a compartement in a consumer fund compliant with the European UCITS regulation. The cat bond asset class is still relatively unknown among Swedish consumers and, as the fund volume has not reached a critical level, the board of SEF SICAV in Luxembourg has decided to terminate the…

How do cat bonds work?

Entropics Asset Management – Cat bond investments

Cat Bonds are securities that transfer insurance risks from an insurer to the financial markets. This provides for insurance coverage for people and enterprises facing catastrophe risk. To investors, Cat Bonds offer an asset class with low correlation and historically good risk adjusted returns.

Fund Rate Since start One week One year Report
SEF Entropics Cat Bond (Class A) 100.29 +0.29% -0.39% +6.43% Latest report
SEF Entropics Cat Bond Fund Class I (institutional investors) 98.38 -1.62% -0.39% +6.63% Latest report

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Risk Information:
Fund investments entail risk. The value of investments in funds can increase as well as decrease and investors can loose all or some of the investment. Historical return is not a guarantee of future returns.

Many investors ask themselves how cat bonds are affected by the stock market falls following the spread of the coronavirus. As cat bonds are exposed to natural catastrophe risks and not to equity markets, ordinary cat bonds are not affected and hence make an attractive diversification option lowering the risk of equity and interest portfolios.… Read more

Robert Lindblom
Robert Lindblom

Following the worst year and a half ever seen for Insurance-Linked securities (ILS) and cat bonds, some investors naturally are asking if the market underestimates the risk associated with cat bonds concerning the effects of climate change. Yet, the dominating risks covered by cat bonds in the timeframe concerned do not primarily come from climate change, but from demographics, which are far easier to analyse with high accuracy. The departure of more opportunistic investors and the growth of mature investors will benefit the reinsurance and ILS sectors by limiting the supply of opportunistic capital and increasing premiums. Read more

Robert Lindblom
Robert Lindblom

The heatwaves and the wildfires in the Northern Hemisphere in the summer of 2018 have put climate change at top of the agenda of media and politics. As we already see the adverse effects of rising temperatures, it is important to assess the impact on insurance-linked securities (ILS). In summary, the typical cat bond term of 3 – 5 years provides for continuous adjustments of pricing to encompass both climate effects and a globally increasing need for insurance. As ILS are an important mean to mitigate climate risks, we are likely to see more ILS solutions in the future. Read more

Martin Hedberg
Martin Hedberg
Chief Meteorologist

In April, new outbreaks of the much-feared hemorrhagic fever Ebola shook the world again. The last major outbreak in West Africa 2014-2016 caused more than 11,000 deaths, and dealt a devastating blow to the long-term economies of several countries in the region. The effects were largely due to slow and insufficient response by the world community. However, this time, it appears that the lessons learned have provided for a much faster response, based on insurance principles and backed by cat bonds, rather than reliance on foreign aid. Read more

Henrik Sjöholm
Henrik Sjöholm
Director of Communications and Responsible Investment

Both cat bonds and corporate bonds are fixed income instruments so it is relevant to compare the risk premium of cat bonds with similarly rated traditional corporate bonds. Currently, cat bonds pay a higher risk premium compared to similarly rated corporate bonds. Read more

Oskar Schyberg
Oskar Schyberg
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