Thoughts on the Fund going into 2015
While it’s very encouraging to receive so many inquiries on when the Fund will open for investments, it’s also hard to have to ask those interested in investing to bear with us for a little while longer. The reason for not just opening the fund and inviting investors is our determination to ensure a successful start for the fund. And doing so requires some caution on the fund manager’s behalf.
Let me give you a few examples of what this approach means to us.
Getting the timing right is crucial. To ensure a good start, we wish to be able to grab opportunities to invest on the secondary, as well as the primary market. But looking into 2015, we see several potentially good dates to open the Fund.
When opening the Fund to a larger audience, we also need to make sure that we have sufficient capacity in the Fund. Though we have announced the possibility of levying fees on investments to limit demand, doing so is really to be seen as a measure of last resort.
Fund capacity may be perceived as a hypothetical issue for a fund that has not yet opened. However, given the general market development, it may not be as hypothetical as one might first think. Persistent difficulties to stimulate inflation and growth are, sooner or later, bound to have repercussions on the financial markets. The collapse in the oil price is likely to stimulate growth, but will further hamper inflation and companies with stakes in high oil prices have been hurt, which we saw when corporate bonds in that sector plummeted this month. In short, there is a huge capital stock looking for return opportunities, without unnecessary exposure to volatility and the stock market.
Given the huge interest in uncorrelated asset classes, we see an increasing risk of managers overstretching and growing too fast, including extending the scope of cat bond investments into new and uncharted territory. Though I understand it may be tempting, I’m firmly convinced that a conservative approach is the responsible choice in this situation.
I’ve repeatedly stated that we are in a very good position right now, as we completely control the decision on when to open the Fund. We’re determined to use this opportunity to the full and I am convinced that everyone following our progress will see that the wait will prove to be worthwhile.
With my best wishes for a prosperous 2015.