Asset Management Pioneer Poised for Its Next Growth Leap
Investment products that show little correlation with traditional financial markets are gaining significant importance in light of the market’s inherent unpredictability – a fact underscored by recent events. In this context, an asset manager with more than 20 years of experience is well-positioned to play a pioneering role.
In today’s increasingly efficient and digitalized financial world, achieving «outperformance» – that is, returns exceeding the market average – has become ever more challenging. Consequently, low-cost investment products that track indices have grown enormously popular.
This approach, commonly referred to as passive investing, often leaves «active» portfolio managers struggling to justify their underperformance. Given these circumstances, only specialized investment firms are typically capable of generating sustainable value over the long term – a phenomenon often described as delivering «alpha.»
The Vontobel Veteran
These considerations led Ulrich Behm, a seasoned asset management specialist, to seek a new professional challenge after more than 25 years with the Zurich-based traditional bank Vontobel. In August 2024, Behm joined the Swiss-based investment boutique Solidum Partners as a partner, as he explains in an interview with finews.asia.
Based in Zurich, the independent firm specializes in insurance-linked securities (ILS) and catastrophe bonds (Cat Bonds). These niche products reward investors with attractive yields while maintaining only a weak correlation with traditional financial markets. But what exactly do these financial instruments entail?
The Genesis: Hurricane «Andrew» as a Catalyst
In their original form, these products were introduced in the early 1990s when Hurricane Andrew devastated southern Florida. The catastrophe pushed several insurance companies into bankruptcy and highlighted the urgent need for the industry to bolster its capital base by developing innovative solutions to manage large-scale insurance risks and catastrophic events.
Under these premises, mathematicians, engineers, and financial experts collaborated to create «Cat Bonds» and related instruments – tools that allow insurers and reinsurers to transfer the balance-sheet–heavy risks onto capital markets.
Remarkable Growth Over the Past Decade
Since their inception, the ILS market, which also encompasses Cat Bonds, has evolved into an asset class with a current volume exceeding $110 billion. Over the past ten years, the segment has grown by more than 50 percent. The main investors in these products are institutional clients, including pension funds, other retirement facilities, and an increasing number of family offices with a long-term investment horizon.
According to the most recent report from financial advisory firm Complementa, nearly 30 percent of domestic pension funds are already utilizing ILS, having invested approximately 8.5 billion francs in this asset class. While these investments are only weakly correlated with the traditional financial markets due to their focus on unpredictable catastrophic events, investors must remain mindful of the potential «event risk.»
A Pioneer with Over 20 Years’ Experience
ILS-based products have been well established in Switzerland for many years, supported by a cluster of financial specialists. Zurich, alongside New York, London, and the Bermuda Islands, stands as a leading center of expertise in this field, as Behm emphasizes.
Founded in 2004 by former Zurich executives Stefan Müller and Karsten Bromann – and expanded through a management buyout in 2006 – Solidum Partners today manages UCITS funds approved for public distribution in several countries, as well as alternative investment funds for family offices and other qualified investors.
With more than 20 years of experience, Solidum Partners is counted among the pioneers in the Swiss market, alongside names such as Swiss Re, Twelve Capital, LGT Capital Partners, and Euler ILS Partners (formerly Credit Suisse).
With approximately 250 million francs in client assets under management, the firm operates as an asset manager for collective investments under the oversight of the Swiss Financial Market Supervisory Authority (FINMA).
Due to its smaller scale, the firm can invest much more selectively than the larger market players, as Stefan Müller explains during the interview.
Climate Change as a Major Factor
While the company employs only seven staff members, it benefits from the expertise of industry veterans like Peter Bütikofer and Thomas Kraus, who serve on its board and advisory panels. Their guidance helps position Solidum Partners as one of the most competent firms in the sector.
Today, climate change is an issue that the insurance industry can no longer ignore. The potentially significant damages it may cause, amplified by the increasingly severe natural catastrophes observed in recent years, add urgency to the problem while simultaneously fueling the growth of this niche asset class.
Bold Growth Plans
Driven by these developments – and by the strong growth in insured assets in high-risk regions such as Florida and California – the demand for capital in the insurance industry is rapidly increasing. This trend presents a significant growth opportunity for the ILS market and promises attractive yields on Cat Bonds as investors assume event risks.
Against this backdrop, Solidum Partners sees enormous growth potential even after two decades in business. The firm aims to further capitalize on this opportunity with Behm’s arrival.
As he outlines in the interview, his goal is to increasingly engage mid-sized pension funds, as well as banks and independent asset managers in Switzerland and Germany, seeking returns that currently average 6-8 percent above money market rates.
The Necessity of Active Management
«Cat Bonds and other securitized insurance risks represent an attractive and stable asset segment that must be actively managed – in a market that is steadily shifting toward index-based products,» Behm concludes.
