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Diversification with Cat Bonds?

Harvesting insurance premiums

Nicolas Rabener
10 min read
20 Oct 2025

SUMMARY

  • Investors can now access catastrophe bonds through mutual funds and ETFs
  • They have offered impressive returns with minimal drawdowns
  • However, they are more correlated with equities and bonds than often assumed

INTRODUCTION

The ETF universe continues to broaden, now covering nearly every conceivable investment strategy. In 2025, another niche product was launched: the Brookmont Catastrophic Bond ETF (ILS), offering investors direct exposure to catastrophe (“cat”) bonds (read Avoiding Disasters with Catastrophe Bonds?). The fund seeks to deliver positive, uncorrelated returns – the very attribute often promised, but rarely achieved, by many alternative strategies such as hedge funds.

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