(Bloomberg) — Hedge fund firms that set up reinsurance companies will struggle because too many rivals had the same idea and investment results have been disappointing, according to a report from S&P Global Ratings.
Money managers entered the reinsurance business to gain access to permanent capital, in some cases more than $1 billion. They also sought a tax advantage by setting up operations in locations such as Bermuda. Reinsurers provide coverage for primary carriers.
“It’s a crowded trade,” S&P analyst Taoufik Gharib said by phone. “Hedge fund reinsurers, they don’t have a long track record, and they’re trying to compete.”
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