Brookmont exploring options to bring cat bond ETF to Europe: Report

Brookmont Capital Management, LLC is reportedly looking at options to bring its US listed catastrophe bond ETF to Europe, which would expand the universe of investors able to allocate to the firm’s cat bond strategy.

The Brookmont Catastrophic Bond ETF (ticker ILS), listed on the New York Stock Exchange (NYSE) at the beginning of April, becoming the first catastrophe bond fund strategy to be US exchange-listed and traded.

With a goal to make the insurance-linked securities (ILS) asset class more accessible to investors, it’s been reported that Brookmont has more expansive plans than just addressing the United States market.

ETF Stream, a specialist publisher focused on exchange traded funds in Europe, spoke with Ethan Powell, Principal & Chief Investment Officer of Brookmont Capital Management, LLC, who said that a European ported ETF is one possibility being looked at.

Powell told ETF Stream that Brookmont has had “several conversations” with HANetf, a specialist company that helps ETF investment managers bring their strategies to Europe via its white-label platform.

The benefits of catastrophe bond investments are already well-known in European institutional investor circles, not least thanks to the now more than $15.3 billion of assets held by Europe-domiciled UCITS cat bond funds.

While the ETF had launched without a lead market maker in the US, Powell said that several secondary liquidity providers are engaged.

“We have several secondary liquidity providers that are making active markets, hence the tight spread,” explained Powell.

Adding that, “The European financial services sector is very familiar with the asset class and in fact some of our market makers in ILS are based in Europe. I do not believe liquidity and market making will be an issue.”

Typically, UCITS cat bond funds offer bi-weekly or weekly liquidity, while an ETF wrapped for the European market could offer more frequent liquidity to its investors.

The UCITS cat bond space has been growing strongly and recently added one new strategy from RenaissanceRe, while another from Man AHL is said in the works.

The insurance-linked securities (ILS) market has seen London Stock Exchange listed strategies in the past, but for quite a few years now there have not been any exchange-listed ILS funds in the European region.