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00:46
Hedge Funds setting up Reinsurers: Who has done it, and why?.
03:08
Why do reinsurance vehicles run by hedge fund managers outperform the manager's own flagship fund?. The operational business of reinsurers set up by hedge fund managers: - Severity Business and Frequency Business - Diversification of risk is key
06:28
The "Float" arises because premiums are received before losses are paid. In between, the insurer invests the money. Though individual policies and claims come and go, the amount of float the reinsurer can hold remains remarkably stable in relation to premium volume. This leaves the fund manager with a much more stable funding base than using margin loans, for example.
07:57
Benefits for a hedge fund manager setting up a reinsurer: • Higher returns of own invested capital. • Obtain permanent capital. • Why Tiger Management, once the world's largest hedge fund, had to close, while Berkshire thrives. • Getting assets from capital sources that otherwise don't invest in a hedge fund: -- Private equity, mutual funds and individuals. -- Overcome tax, ERISA or "99 investors" restrictions.
10:20
Why have so few hedge funds set up reinsurers? Setting up a reinsurance company is "harder than it looks" How Taussig's "Multi-Strat Re" platform: - solves the catch-22 of how to staff the operation - provides a turn key solution allowing a set up in 2-3 months - at minimal start up ($100K) and operational costs (savings of 90+%)
16:12
Size, track record, strategy: what is required from a fund manager to set up his reinsurer?. - Manager should be able to earn a return on the "float" in excess of cost of insurance. - should be confident to achieve net 3% performance over 5 year rolling periods. - As liabilities have to be secured by letters of credit, liquid and price-transparent strategies tend to suit well, but also suitable for fund of funds. - Reinsurers probably the only business able to offer an IPO as start-up: market
19:59
Compliance with SEC and AIFMD made easy: - Investors buy a stock (in a reinsurance company whose funds are managed by a hedge fund manager). - Simple, painless and proven vehicle for non-US managers to get US assets (via Reg D) and for US managers to get EU assets (complying with AIFMD.
22:24
By 2014-2015 Taussig expects to add 2-4 managers per month to the multi-strat reinsurance platform. Turn-key solution attracts both small and large managers. Most interest from New York( tri-state area) and London. The 14 blue chip hedge funds that set up reinsurers.

Why have 14 blue chip hedge fund managers acquired or started reinsurers?

Jul 09 2013 1 Comment
Warren Buffett ran a hedge fund for 12 years before quitting fund management and turning to banking, insurance, and reinsurance in 1969 as a better way to generate returns. Taking their cue from Buffett, Moore, Maverick, Greenlight, Cerberus, Citadel, HBK, D.E. Shaw, Apollo, AQR, Third Point, SAC, Paulson, and Soros have all acquired or started reinsurance companies (Soros has formed at least four).

The primary reason is that the reinsurers are virtually certain to outperform the managers’ funds. Secondarily, the managers obtain asse ...more

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