GAM, the Zurich-headquartered asset manager, has partnered with Fermat Capital Management to launch the GAM FCM Cat Bond fund, a vehicle which targets returns from the so-called “catastrophe market”.

FCM specialises in insurance risk and catastrophe bond investing and GAM had already been channelling funds to the firm for over six years before deciding to offer the fund to the market at large. The fund invests in both catastrophe bonds and other insurance-linked securities.

FCM’s investment philosophy centres on the idea that catastrophe bonds offer great diversification potential as returns are not dependent on macroeconomic or financial factors but rather on whether natural catastrophes occur or not. While the firm believes that catastrophe bonds provide a persistent and repeatable source of attractive risk-adjusted returns, choosing the components of the portfolio is obviously a highly sophisticated process and FCM has developed proprietary modelling software to guide its selections. 

“Given catastrophe bonds’ unique underlying risks, they are likely to remain a truly uncorrelated asset class. During the recent financial crisis, cat bonds have proved that they deserve their reputation as a genuine alternative investment strategy,” said Dr John Seo, co-founder and managing principal of FCM.

Catastrophe-related investing is a comparatively esoteric area of the market, but there are several firms specialising in this sector. Prominent players include Nephila Capital and CatCo, both of which are Bermuda-based.