Investment Strategies

Twelve Capital offers a range of investment strategies that capture insurance investment opportunities across different asset classes.

Insurance-Linked Securities (ILS)

Cat Bonds

Cat Bonds allow capital market participants to invest into insurance event risk, such as tropical cyclones, earthquakes and other catastrophes.

Twelve Capital manages a range of Cat Bond mutual funds and also tailor mandates to the specific risk profiles and return objectives of institutional clients. Historically, Cat Bonds have shown low correlation to traditional financial markets and alternative asset classes.

The legal, qualitative and quantitative aspects of a Cat Bond are rated and a relative pricing methodology is used to identify opportunities.

Private ILS

Twelve Capital’s Private ILS strategy focuses on providing capital support to reinsurers for Peak Peril risks. Peak Perils represent the highest concentration of insured values globally, in areas potentially exposed to large natural catastrophes, such as US hurricanes, earthquakes in California and Japan, typhoons in Japan and European windstorm. Historically, Private ILS investments have shown minimal correlation to traditional financial markets and alternative asset classes.

In-depth quantitative and legal analysis on a diverse range of Private ILS transactions are sourced and performed. Twelve Capital is able to construct high-conviction, diversified portfolios in line with allocation limits and liquidity terms.

Insurance Debt / Credit

Insurance Bonds

An actively managed strategy focused solely on exploiting insurance sector opportunities globally, that at its core is liquid and investment grade bond dominated.

Twelve recognised that bank deleveraging in the wake of the 2008 financial crisis and the introduction of the Solvency II regulatory regime in Europe would create investment opportunities. Twelve manages a range of Insurance Bond funds and tailor-made mandates.

Analysis of the fundamental value of insurance companies as well as the legal terms and the price of a debt instrument is undertaken. Evaluation of the risk-return profile of each issue is carried out with an emphasis on comparative value among issues.

Private Debt

Twelve anticipated the growing need for solvency capital among smaller insurance companies, especially in Europe and now manages a growing number of Private Debt portfolios, including several tailor-made mandates.

The Firm applies a fundamentally driven bottom-up strategy, finding and providing debt financing to creditworthy companies with strong balance sheets. Twelve has an extensive track-record in executing self-arranged bilateral transactions and in participating in small club deals. The transactions have an attractive illiquidity premium and offer considerable scope for portfolio diversification.

Insurance Equity

Twelve manages portfolios of global listed insurance equities with the objective of achieving returns in excess of the global insurance equity benchmark. Key areas of focus include; dividend yield, M&A, seasonality.

Twelve Capital recognises that M&A activity in the insurance industry has been heightened in recent years. A multitude of factors drive the view that this is set to continue, including: industry overcapacity, cost pressures, technological change, scale advantages, a challenging operating environment for some insurers and the availability of low cost financing.

The investment process is both a top-down and bottom-up approach, with ongoing risk management.

Multi Asset

Best Ideas

Twelve Capital’s more liquid Best Ideas portfolios comprise Insurance Bonds, Cat Bonds and, potentially, listed Insurance Equity. Comingled portfolios have additional scope to exploit illiquidity premiums through Private Debt and Private ILS transactions. All these portfolios aim to harness the favourable performance characteristics of the underlying strategies they include.

Twelve Capital uses a fundamentally driven bottom-up approach to identify appropriate complementary insurance transactions and securities. A relative value process is applied to compare the risk-return potential of different investment opportunities and select the highest conviction ideas. Twelve Capital is able to construct and adjust portfolios after stress testing them and analysing the correlations between the constituent investments.