Access uncorrelated yield with minimal duration and credit risk
Investment Manager
Uncorrelated performance
Catastrophe bonds potentially offer returns driven by natural events rather than economic cycles or market sentiment. This non-correlated behaviour can provide meaningful diversification, potentially helping portfolios remain resilient during periods of equity or credit market volatility.
Minimal duration or credit risk
Cat bonds typically offer competitive yields derived from short-term, high-quality collateral plus a premium for assuming catastrophe risk. This structure results in floating-rate income with minimal credit or duration exposure, which can be appealing in an unpredictable rates environment.
Experienced active management
Historically reserved for institutional investors, the cat bond market is now accessible through this actively managed UCITS ETF. Combining King Ridge Capital’s specialist expertise with daily liquidity and transparent pricing, the ETF brings professional catastrophe bond management to a broader investor audience.
Active management may help navigate complex catastrophe-risk models, selectively price evolving climate exposures, and adjust quickly after major events – aiming to capture higher spreads while avoiding deteriorating risks.
The investment strategy seeks to provide investors with attractive risk-adjusted returns and low correlation to traditional asset classes by investing primarily in a diversified portfolio of catastrophe bonds. The strategy focuses on securities that transfer well-defined natural catastrophe risks, such as U.S. hurricane, U.S. earthquake, European windstorm, and Japanese earthquake from insurers and reinsurers to the capital markets.
The investment process follows a disciplined, analytics-driven approach to portfolio construction. Securities are selected based on peril diversification, trigger structure, expected loss, spread, coupon, sponsor quality, and secondary-market liquidity. The portfolio emphasises low to moderate expected loss layers, seeking a balanced mix of income generation and downside protection. Since natural disasters are regional in nature, we design our portfolios to be resilient through geographic diversification ensuring that even when certain regions experience losses, the overall portfolio can still generate positive returns for investors. Catastrophe exposures are further managed through strict concentration limits by peril, sponsor, and expected loss to ensure robust diversification.
The investment process leverages advanced cat modelling, scenario stress testing, and real-time event monitoring to evaluate the impact of potential natural disasters on portfolio risk and return. We maintain a laddered maturity profile, typically investing in bonds with 1–3 year durations, to enhance liquidity. Portfolio turnover is opportunistic and driven by relative-value opportunities, primary issuance dynamics, and evolving cat risk conditions.
Through this systematic approach, we aim to deliver uncorrelated income, capital preservation across market cycles, and efficient access to a historically hard-to-reach asset class within a regulated, transparent UCITS framework offering daily liquidity.
Rick Pagnani | Lead Portfolio Manager
Rick Pagnani is the co-founder, lead portfolio manager, and CEO of King Ridge Capital. Before establishing KRC, he served as Executive Vice President and Head of PIMCO’s insurance-linked securities business and was CEO of Newport Reinsurance Ltd. Prior to PIMCO, he was CEO of Mt. Logan Re, where he launched and expanded Everest Re’s third-party ILS platform. Rick also held senior roles as a partner at TigerRisk Partners and as CEO of Ascendant Reinsurance, and he was a Managing Director at Swiss Re New Markets. He has 36 years of investment experience and holds an MBA from Fordham University and a bachelor’s from Hobart College.
Vijay Manghnani, Ph.D., FCAS | Portfolio Manager
Vijay Manghnani is co-founder, CIO, and CUO of KRC, and a recognized leader in ILS, catastrophe risk, and climate-related financial products. His career spans major global insurance and financial institutions, advancing science-driven analytics and risk management. Vijay was a founding member of PIMCO’s ILS team, served as SVP and Head of Risk and Analytics, and was Chief Risk Officer and Chief Actuary at Newport Re. He also led AIG’s Catastrophe Risk Management Center of Excellence and held senior roles at ACE/Chubb, Renaissance Re/Weather Predict, and Aquila. He holds a Ph.D. in Meteorology, is an FCAS, and has contributed extensively to climate-risk research and education.
Shiraj Khan, Ph.D. | Research and Analytics
Shiraj Khan is a Partner and Head of Property Analytics and Research at KRC, with extensive expertise in ILS, analytics-driven underwriting, portfolio construction, catastrophe modelling, and climate risk analysis. Previously, he was part of PIMCO ILS where he strengthened the ILS analytics framework through proprietary research that enhanced underwriting accuracy. Prior to that, he established AIG’s first R&D group, advancing risk models for global catastrophe exposures. Shiraj holds a Ph.D. from the University of South Florida and a bachelor’s from Indian Institute of Technology (IIT), where he received the President of India Gold Medal.
KRC Cat Bond UCITS ETF (CATB) is Europe’s first UCITS ETF providing access to the catastrophe bond market, an asset class offering attractive floating rate yields and low correlation to traditional markets.
Managed by King Ridge Capital, a specialist in insurance-linked securities (ILS), the ETF invests in a diversified portfolio of cat bonds that transfer natural disaster risk, such as hurricanes and earthquakes, from insurers to capital markets.
The ETF combines King Ridge’s expertise with the transparency, efficiency, and daily liquidity of the UCITS ETF structure.
Key Risks
When you invest in ETFs your capital is fully at risk and may not get back the amount originally invested. Exchange rates can have a positive or negative effect on returns. The value of equities and equity-related securities can be affected by daily stock and currency market movements.
There is currently insufficient data to display the performance history.
No. of holdings: 72
The concept of ILS gained traction in the 1990s following several significant natural disasters, such as Hurricane Andrew (1992). These events highlighted the need for additional capital to support the insurance industry, especially for covering large, infrequent, and severe losses.
Simply put, ILS are financial assets that transfer insurance risks to the capital markets. The most common type of ILS is a catastrophe bond, which transfers risk of events, such as hurricanes, earthquakes, or wildfires, to capital market investors. This helps insurers manage their exposure to large-scale losses and maintain financial stability.
As in any bond, investors receive regular interest coupons. These payments are typically higher than those of comparable high-yield bonds. If the specified catastrophic event happens (e.g., a major hurricane hits), the bond is « triggered. » This means the insurance company can use some or all the money in the secure account to pay for the damages and claims. If the catastrophic event doesn’t occur during the bond’s term (usually 3-5 years), investors get their principal back at the end of the term, along with the interest payments they received along the way.
Cat Bonds are floating rate instruments like collateralised loan obligations, which makes them somewhat insulated from interest rate volatility.
ILS provide an important source of returns that are largely not related to factors driving the financial markets. Investors value a truly diversifying asset. Performance is driven by the occurrence of natural events – such as hurricanes, earthquake and floods – not by the financial markets.
In other words, unlike many other financial assets, in ILS, the risk trigger (a catastrophe event) is decoupled from the underlying source of yield.
The diversification properties of ILS have been demonstrated across various financial market events. For instance, during the global financial crisis in 2008-2009 – when global equities were down 54% – ILS returned 5.1%, based on the Swiss Re Cat Bond Index.
The 23-year annualised average returns of the Swiss Re Cat Bond Index is around 8%. The time series of annual returns for the index are presented below. Notably, over the past decade, there has been only one year of negative returns – a decline of -2.15% in 2022. This performance is particularly impressive given the increasing property and casualty (P&C) underwriting risks in the face of changing weather patterns.
It is crucial to consider not only the return profile of ILS but also their correlation with other primary asset classes. As illustrated in the correlation matrix below, ILS returns are largely uncorrelated with those of other asset classes. Consequently, incorporating an ILS component into most portfolios may enhance returns and reduce volatility, effectively pushing the portfolio’s performance upward and outward on the efficient frontier.
Sources: Correlation based on monthly returns from Jan 2002 through Dec 2023. CAT Bonds represented by the Swiss Re Global Cat Bond Total Return Index. US Stocks represented by the S&P 500 Index. Commodities represented by Bloomberg Commodity Index. US Agg IG Bonds represented by the Bloomberg US Aggregate Index. US HY Corp Bonds represented by ICE Bank of America US High Yield Constrained Total Return Index.
Think of an ILS or Cat Bond structure like a collateralised loan obligation (CLO) or residential mortgage-backed security (RMBS). These structures have various attachment points, with losses accumulating from the equity tranche upward to more remote layers. The more remote the attachment point, the lower the risk, but also the lower the « coupon » or interest payment. Therefore, most of the events don’t rise to the excess CAT bond tranches.
A well-diversified ILS portfolio is further insulated from any single large shock event, since exposure to different perils and exposures is closely monitored and managed in real time by expert portfolio managers.
ILS also generally reprice annually to account for changes in underlying exposures and the market/underwriting environment.
Finally, Cat Bonds are floating rate instruments like CLOs, which makes them somewhat insulated from interest rate volatility.
The primary liquidity strategy will be through diversification and position sizing. For most of the year, the manager will strive for 5% in short-duration liquid instruments. During peak U.S. wind season, more like July-Sep, the manager will follow a prudent approach and may target 5-15% in liquid instruments depending on the portfolio mix and opportunity set.
There are other seasonal windows, but they are not significant drivers of the CAT bond market exposure. Therefore, the manager does not need to maintain a liquidity buffer for these windows.
The underlying CAT bond secondary market is active, as is the new issuance pipeline. The manager expects to be able to judiciously deploy new capital within a 1–3-week window after creates. With regards to redemptions, the manager will tap into its short-duration liquid instruments followed by in-kind/cash redemption with the APs/market makers.
The manager does not rely on the weekly pricing sheets. The ETF uses daily evaluated prices from Intercontinental Exchange (ICE), which provides independent, security-level marks across the catastrophe bond universe. These daily prices are delivered through the custodian and fund administrator and flow directly into the ETF’s NAV process.
Weekly pricings sheets (from Swiss Re or other sources) are an industry reference but not used for NAV. ICE builds daily prices using a blend of model-based valuation, actual market colour, structural bond parameters, and analyst review; producing a fully independent daily evaluated price suitable for UCITS/ETF requirements.
The manager’s extensive experience in the insurance and reinsurance industries provides them with a deep understanding of the critical factors in building and managing ILS portfolios. Years of underwriting risks in the insurance and reinsurance space enable them to evaluate the unique perils embedded in individual Cat Bonds and assess the value associated with return expectations.
A unique differentiating factor is Vijay Manghnani’s doctorate in meteorology and his leadership in assessing the impact of climate change on underwriting risks. In a world of increased climate volatility and loss severity, in-house climate expertise is essential. King Ridge Capital’s collective experience has driven the development of proprietary models that are crucial for evaluating the risks embedded in every Cat Bond. Without a clear understanding of these risks, it is impossible to determine whether investors are being appropriately rewarded for participating in the underwriting of those risks.
Their long tenure in the industry has also fostered strong relationships across private and syndicated markets, which are essential for maintaining high levels of information flow. Collectively, these factors have led to the development of a rigorous, repeatable, and highly structured investment process that aims to ensure ongoing success.
King Ridge Capital Advisors is an alternative asset manager specialising in insurance-linked securities (ILS) and catastrophe bond strategies. Founded by the former leadership of PIMCO ILS team, King Ridge combines institutional investment rigor with deep insurance underwriting expertise to deliver non-credit, non-correlated income solutions for sophisticated investors.
The firm’s principals, Rick Pagnani, Vijay Manghnani, and other senior professionals, bring decades of experience spanning insurance, reinsurance, and global investment management. Prior to forming King Ridge, the team managed ILS portfolios at PIMCO, overseeing catastrophe bond and collateralized reinsurance strategies for institutional investors.
The ETF is managed by:
Read the Liquidity Management FAQs below
Catastrophe bond exposure refers to investments in insurance-linked securities that transfer specific insurance risks—such as hurricanes, earthquakes, or other natural disasters—from insurers to capital markets. These instruments pay a fixed or floating coupon, but investors may lose part or all of their principal if a defined catastrophic event occurs. The return profile is therefore driven less by traditional market factors and more by the probability and severity of insured events. The return profile is therefore driven less by traditional market factors and more by the probability and severity of insured events. This makes catastrophe bonds a distinct asset class: returns are largely independent of equity and bond market cycles, which is why they are often used to diversify a broader portfolio.
Catastrophe bonds generate returns through periodic coupon payments funded by insurance premiums paid by the issuing insurer or reinsurer. These coupons are typically higher than those of traditional fixed income instruments to compensate investors for bearing event risk. If no qualifying catastrophe occurs during the bond’s term, investors usually receive full principal repayment at maturity. However, if a predefined trigger event occurs—such as a major hurricane or earthquake—principal may be reduced or lost depending on the structure of the bond. This creates a return profile driven by both income and event risk.
Catastrophe bond markets most commonly cover natural disaster risks such as US hurricanes, Pacific typhoons, European windstorms, Japanese earthquakes, and North American earthquakes. Some structures may also include additional perils such as floods or wildfires, depending on the sponsor and market demand. Each bond defines specific trigger conditions, such as parametric measures (e.g. wind speed or earthquake magnitude) or indemnity-based losses tied to insured damages. The precise risk coverage varies significantly by issuance, so investors should examine which perils and trigger types a fund is exposed to, rather than assuming all catastrophe bond strategies carry the same risk profile.
Catastrophe bonds are considered largely uncorrelated to traditional financial markets because their performance is driven by physical event risk rather than economic cycles or corporate earnings. Factors such as GDP growth, interest rates, or equity market volatility typically have limited direct impact on whether a hurricane or earthquake occurs. Instead, returns are primarily influenced by natural hazard frequency and severity. This lack of correlation is one reason insurance-linked securities are often considered for diversification within broader portfolios, although they introduce their own unique risks related to extreme events.
Risk in catastrophe bond investments is assessed using probabilistic models that estimate the likelihood and severity of specific natural disasters over a defined period. These models incorporate historical data, climate patterns, geographic exposure, and engineering assumptions about infrastructure vulnerability. Each bond is assigned an expected loss metric, which helps determine its coupon level. Investors also consider the attachment point (when losses begin) and exhaustion point (when principal is fully at risk). While modelling is highly sophisticated, it cannot eliminate uncertainty around extreme, low-frequency events.
The yield on catastrophe bonds is primarily determined by the perceived probability of a triggering catastrophe event and the severity of potential losses. Higher-risk perils or regions generally offer higher coupons to compensate investors. Additional factors include bond structure, trigger type, modelling assumptions, and market demand for insurance-linked securities. Because pricing reflects risk transfer from insurers to capital markets, yields can vary depending on reinsurance market conditions and catastrophe loss experience in prior years.
Key risks include event risk (the occurrence of covered catastrophes), model risk (limitations in catastrophe forecasting), and liquidity risk (secondary market trading can be limited). A single severe event can materially impact returns, depending on the bond’s structure and attachment levels. There is also basis risk, where actual losses differ from modelled or trigger-based outcomes. Climate change is also a relevant long-term consideration: rising sea levels and shifting weather patterns may increase the frequency or severity of certain perils over time, which catastrophe models continuously seek to incorporate but cannot predict with certainty. These factors make returns inherently uncertain and episodic.
Diversification in catastrophe bond portfolios is achieved by spreading exposure across different geographic regions, peril types, and trigger structures. For example, a portfolio may include exposure to US windstorms, Japanese earthquakes, and European wind events simultaneously. Because these risks are not strongly correlated with each other, diversification can reduce the impact of any single event on overall portfolio performance. However, extreme global events or clustered disasters can still affect multiple positions. Portfolio construction therefore focuses on balancing expected return against concentrated event risk exposure.
Disclaimer: These FAQs have been generated with the assistance of AI and may contain errors or omissions. They are provided for general information only and do not constitute investment advice, a recommendation, or an invitation to buy or sell any investment.
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About Investment Manager
King Ridge also manages private funds and serves as sub-advisor to the Brookmont Catastrophe Bond ETF (NYSE: ILS), the first U.S.-listed catastrophe bond ETF.
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