Connecticut-based investment management firm AQR Capital has formed a new reinsurance group that will develop investment strategies that have low correlation with traditional markets and hedge funds.
AQR said the new reinsurance group will offer dynamic exposures to a set of risk and reward opportunities that are difficult to assemble, totalling to over 50 different territory and peril exposures with minimal correlations among themselves.
According to AQR, the exposures will vary substantially from those prevailing in the credit, commodity, equity and currency markets.
In connection to this, the firm has appointed Andrew Sterge to lead the new reinsurance group. He was former head of both Pulsar Re Holdings, the reinsurance affiliate of Magnetar, and the Cooper Neff Group.
In addition London based reinsurance underwriters, Rick Montgomerie and Charlie Vaughan will work with Sterge.
AQR founding partner and head of client strategies David Kabiller said Reinsurance is one of the most diversifying sources of risk premium that a pension fund can access, in part because reinsurance risks are diversifying among themselves, unlike the correlation one finds among other financial assets.
"Reinsurance risk allows you to construct a portfolio with very high risk-adjusted returns and limited downside, but with an equity-like risk premium," Kabiller said.