Cat bond funds lead at 3.02% H1 2025 return, private ILS funds average 1.01%: ILS Advisers

Catastrophe bond funds have outpaced private ILS funds included in the ILS Advisers Fund Index for the first-half of 2025 and across the group of 37 constituent insurance-linked securities (ILS) funds tracked by the Index, the average return for the six months was 2.05%.

Across the insurance-linked securities (ILS) fund sector, the month of June 2025 in isolation saw the average return across the ILS fund strategies tracked by ILS Advisers reach 1.11%.

The six month average return across all ILS fund strategies tracked of 2.05%, is currently running behind the average over the history of the Index, which comes out at approximately 2.34% for the first-half since 2006.

The impact of California wildfire losses in January 2025 was the main detractor for the ILS Advisers Fund Index this year, as that month saw the Index fall 2%.

Looking back at an average for previous January’s, which are typically a positive month of ILS fund performance, had 2025 seen similar, then the half-year return in 2025 would likely have been slightly above last year, the data suggests, with a mid-4% performance seeming possible absent that major event.

February’s performance for this ILS fund Index was also depressed in part due to the wildfires, so without those losses it seems the performance of the Index for H1 2025 could have been the second-highest on record for a first-half, which helps to drive home the fact ILS returns remain historically very attractive for investors.

As is typical of the time of year, private ILS fund strategies that allocate to private reinsurance and retrocession arrangements have outpaced pure cat bond funds in June.

Pure catastrophe bond funds averaged a 0.86% return for the month, while the group of funds that also allocate to private ILS delivered an average 1.37% return for June 2025.

All 35 of the ILS funds that have reported were positive for the month, but again there was a wide range as private ILS strategies demonstrated their ability to deliver higher returns.

The worst performing ILS fund for June returned 0.58%, while the best performing delivered an impressive 3.98% for the month.

Across the first-half of the year though, it was catastrophe bond funds that outperformed.

For the six months to June 30th 2025, pure cat bond funds were up by 3.02% on average, while private ILS funds gained 1.01% for H1.

The cat bonds funds in this Index outperformed the Swiss Re Global Cat Bond Index for the first-half, showing again that managed strategies often outpace the returns of a market basket.

ILS Advisers explains that it was the California wildfires that caused private ILS funds to underperform in the first-half, with that catastrophe event having a larger impact on private ILS positions than on the cat bond marketplace.

It’s worth reiterating, that without those wildfires this Index of ILS fund performance could have delivered perhaps its second best first-half on record, driving home the fact return potential remains very attractive in the ILS asset class.

With that event now in the rear-view, ILS funds across the board stand to deliver positive performance for July, when that data is reported.

Looking ahead, the hurricane season is the main potential detractor for ILS fund performance, while any other major catastrophic events could also dent the second-half.

But it will be interesting to see how returns earn out across the sector, as this Index continues to provide a valuable view of ILS market returns over time.

You can track the ILS Advisers Fund Index here on Artemis. It comprises an equally weighted index of 37 constituent insurance-linked investment funds which tracks their performance and is the first benchmark that allows a comparison between different insurance-linked securities fund managers in the ILS, reinsurance-linked and catastrophe bond investment space.