Catastrophe Bond ETF Seed Investors Pull Back: Report
- Seed investors are holding off putting money into ILS amid market uncertainty, Bloomberg reports.
- Brookmont's ILS launched on April 1 as the first catastrophe bond ETF.
- The fund has pulled in $5 million since then.
The first catastrophe bond ETF, which began trading this month, has faced a bit of its own stormy weather.
Providers of startup, or seed, capital in the Brookmont Catastrophic Bond ETF (ILS) are holding off submitting their investments, according to Bloomberg News. Firms are holding off after President Donald Trump’s trade war upended markets, the story said.
ILS, Dallas-based Brookmont Capital Management’s single exchange-traded fund, began trading April 1. The next day, President Trump launched his trade war, elevating uncertainty and volatility while raising fears of recession and inflation. The S&P 500 swooned 12% over the next four sessions and is down 4.8% over the past month.
At the same time, bond yields surged and the dollar weakened, rattling markets globally and causing companies to reevaluate their expectations for the near term.
A "Crazy" Environment
Brookmont Chief Investment Officer Ethan Powell told Bloomberg that some of ILS’s seed investors are “sitting on the sidelines because the market turmoil has taken people’s eyes off new asset classes.” He said the investing environment is “crazy” and the firm is choosing to not push investors.
Brookmont, through an outside public relations agency, declined to comment to etf.com.
The ETF aimed to provide investors with access to complex securities that pass the risk of disasters from issuers to investors.
Brookmont's new ETF only holds catastrophe bonds, or "cat bonds," that are tied to natural disasters—not other types of risks, like cybersecurity or terrorism. The fund charges a 1.58% expense ratio, which is high relative to passive investments but not uncommon in more specialized, active funds that are typically only offered to institutional investors.
ILS Flows
The fund holds $6 million after pulling in $5 million in flows since it launched, according to etf.com data. Its price has changed little since trading began.
The fund was unusual in that began trading without a lead market maker. Powell told etf.com last month he expects to name a market maker in the near future.
According to its etf.com fund page, ILS “selects constituents based on geography, peril type, trigger and risk-adjusted return potential.” It lists its top holdings here.
