Catastrophe bonds could offer investors diversification in a low-yield environment

Diversifying into disasters

In an environment where investors are searching desperately for yields and hedge funds are struggling to achieve uncorrelated returns, an investment that has a track record of delivering high returns with almost no correlation to financial markets sounds like a perfect solution.

These attractive qualities have pushed an increasing number of institutions to turn to the catastrophe (cat) bond market.

The attractions of cat bonds have led to a flurry of hedge funds entering the market over the past