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Cat Bonds Are Beating Corporates

Outperformance is biggest in nine months as investors chase returns.

By Charles Mead, Bloomberg | Updated on August 21, 2012

Returns on catastrophe bonds are exceeding those on corporate debt by the most in nine months as investors facing record-low yields chase returns detached from economic performance.

The bonds, designed to protect insurers from payouts on natural disasters such as hurricanes, have gained 1 percent this month, compared with a loss of 0.9 percent for company debt, according to the Swiss Re Cat Bond Total Return index and Bank of America Merrill Lynch data. Returns on dollar-denominated cat bonds were half those of corporates in 2011 as an earthquake and nuclear accident in Japan sparked record losses.

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