As hedge funds rake in record profits in one of the riskiest corners of the debt market, the products behind those returns are now drawing in more mainstream investors. Catastrophe bonds, which last year formed the basis for the best-performing hedge fund strategy, have been delivering gains that trounce those of other high-risk fixed-income products.
“The interest has recently increased amongst institutional investors,” Hilti said. “Even if we believe that these returns won’t be reproduced in 2024, we think that small allocations to the asset class can make sense for investors in order to diversify investment portfolios.”