Hedge funds rake in huge profits betting on catastrophe risk

Novel approach: The destruction by Hurricane Irma in the US territory of St Thomas Island was massive. The increase in the number of natural disasters has led the industry to think about new classifications of cover. — AP

LONDON: For hedge funds, the science of catastrophes helped generate the best returns of any alternative investment strategy last year.The calculus around natural disasters such as hurricanes and cyclones fed record gains at funds managed by firms including Tenax Capital, Tangency Capital and Fermat Capital Management.

All three delivered results that were more than double an industry benchmark, according to public filings, external estimates and people familiar with the funds’ numbers.