Hedge funds received record profits in 2023 – Kommersant

Hedge funds made record profits in 2023 from catastrophe bonds and other securities linked to insuring risks associated with natural disasters. According to Bloombergprofitability twice as high as the market average at the end of the year was achieved by such large hedge funds as Tenax Capital, Tangency Capital and Fermat Capital Management.

Catastrophe bonds are issued by insurance companies, which thereby shift some of the responsibility for insurance payments to investors. Those, in turn, by purchasing these bonds, agree to lose most or all of the money invested in these securities in the event of a catastrophe. But if the insured event specified in the contract does not occur, the investor receives a profit. For example, the British Tenax received 18% of its profit for the year from insurance bonds, most of which are related to covering expenses in the event of natural disasters. And Fermat’s profit reached 20%. According to the consulting company Preqin, the average return of hedge funds in 2023 was 8%. At the same time, the profit on insurance bonds reached 14.4%, and specifically catastrophe bonds – 19.7%.

Given the large number of natural disasters in recent years, insurance companies have significantly increased the issuance of catastrophe bonds in 2023. According to Artemis, this market reached a record volume of $16.4 billion at the end of the year. However, there were not so many natural disasters themselves last year compared to previous years, as a result of which investors received such high profits.

Kirill Sarkhanyants