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Fermat Capital Management uses climate-related factors to optimize returns in catastrophe bonds, focusing on diverse perils.
Market growth in catastrophe bonds includes addressing secondary perils like floods and wildfires for future investment opportunities.
Deep dives
Fermat Capital Management's unique strategy in catastrophe bond investments
Fermat Capital Management specializes in catastrophe bond investments, managing the world's largest collection of such bonds. With assets totaling around $10 billion, they employ a sophisticated approach utilizing risk models enhanced by their co-founder's physics background to predict disaster likelihood and optimize risk-return profiles.
Impact of a warming planet on Fermat Capital Management's strategy
As global warming contributes to increased risks of catastrophic events like floods and wildfires, Fermat Capital Management considers climate-related factors in their investment strategy for catastrophe bonds. With a focus on various perils including hurricanes, tsunamis, and earthquakes, they aim to diversify their portfolio and leverage insights gained from these climate-related risks.
Fermat Capital Management's returns and market outlook
Fermat Capital Management achieved impressive returns of 20% last year as a leading investor in catastrophe bonds. Despite the risks involved, the returns from investing in these bonds can be significant, especially when disaster events do not occur. The market for catastrophe bonds is expected to continue growing, particularly in addressing secondary perils such as floods and wildfires, with Fermat's unique investment strategy guiding their market outlook.
Future trends in the catastrophe bond market
The future of the catastrophe bond market lies in covering more common medium-sized disasters like floods and wildfires, in addition to rare catastrophic events. With the availability of more sophisticated models and data for these risks, investors like Fermat Capital Management are positioned to navigate these challenges and capitalize on the evolving landscape of catastrophe bond investments.
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Daniel Flatley, Bloomberg National Security Reporter, discusses the U.S House passing a bill that would force TikTok’s sale or ban it. Seema Shah, Vice President of Research and Insights at Sensor Tower, joins to discuss where ad dollars would go if TikTok is banned. Wendy Benjaminson, Bloomberg Washington Senior Editor, discusses Donald Trump scoring a partial victory in battling his Georgia prosecution for attempting to overturn the 2020 presidential election. Ben Emons, Senior Portfolio Manager, Head of Fixed Income at NewEdge Wealth, joins to discuss the latest on the markets. Drew Reading, Bloomberg Intelligence U.S Homebuilding Analyst, joins to preview Lennar earnings. Guatam Nalik, Bloomberg Senior Editor, ESG Investing, discusses his Big Take column: “How a Physics Whiz Made a Killing Betting on Nature’s Catastrophes.”