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Why Invest in the Brookmont Catastrophic Bond ETF (ILS)
Four Compelling Reasons to Invest
Catastrophe bonds derive their value from randomly-occurring natural disaster events rather than from economic conditions, creating returns that historically show minimal correlation with stocks, bonds, and other traditional investments. This unique quality makes ILS an effective portfolio diversifier.
- Performance is driven by the occurrence of natural disasters, not interest rates or market sentiment
- Historically resilient during financial market stress, including positing positive returns during the 2008 crisis
- Protection against inflation and interest rate volatility that impacts conventional fixed income
The catastrophe bond market offers compelling yield opportunities compared to traditional fixed income investments.
- Current spreads often exceed those of high-yield corporate bonds
- Floating rate structure helps protect against interest rate increases
- Expected loss on most catastrophe bonds is below 2% (with many below 1%)
- $17.7 billion in new issuances in 2024 demonstrates robust market growth
ILS solves the accessibility challenges that have historically limited investor participation in catastrophe bonds.
- Shares trade in real-time on the NYSE, eliminating rigid redemption schedules
- Transparent holdings and pricing compared to private fund structures
- Simple, diversified access to a complex asset class through a single, cost-effective vehicle
- Professional risk management from industry experts Brookmont Capital and King Ridge Capital Advisors
As natural disasters increase in frequency and severity, catastrophe bonds play a crucial role in the global risk transfer system.
- Helps close the growing "protection gap" between economic and insured losses
- Provides financial support for communities recovering from catastrophic events
- Exposure to a market expected to grow to $80 billion by the end of the decade
- Diversified holdings across multiple perils (hurricanes, earthquakes, wildfires) and global regions
What Are Catastrophe Bonds?
Catastrophe bonds ("Cat bonds") are specialized financial instruments that transfer the risk of natural disasters from insurance companies to capital market investors. Here's how they work:
Risk Transfer
Insurance companies issue Cat bonds to cover potential losses from specific natural disasters like hurricanes, earthquakes, or wildfires.
Investment Structure
Investors purchase these bonds, and their principal is held in a secure collateral account.
Return Mechanism
If no qualifying disaster occurs during the bond term (typically 3-5 years), investors receive regular floating-rate interest payments and get their principal back at maturity.
Trigger Events
If a predefined catastrophic event occurs—such as a hurricane causing insured losses above a specified threshold—investors may lose some or all of their principal, which goes to the insurance company to cover claims.
Cat bonds create a win-win scenario: insurers gain additional protection beyond traditional reinsurance, and investors access high-yield returns uncorrelated to financial markets.
Pioneering Access to a Resilient Asset Class
The Brookmont Catastrophic Bond ETF (ILS) represents a groundbreaking opportunity in the investment landscape—it is the first NYSE-listed ETF providing investors with daily, transparent access to catastrophe bonds. As climate volatility reshapes financial markets, ILS delivers a strategic solution for investors seeking strong risk-adjusted returns independent of traditional market movements.
ILS By the Numbers
$50+ billion
Size of the outstanding catastrophe bond market
$17.7 billion
Record new issuances in 2024
2-3%
Average expected loss for catastrophe bonds
25+ years
Market history demonstrating resilience through multiple catastrophic events
Understanding the Cat Bond Investment Cycle
- Issuance: Insurance companies issue cat bonds through special purpose vehicles (SPVs), typically based in Bermuda
- Investment: The Brookmont ETF purchases these bonds as part of a diversified portfolio
- Interest Payments: Investors receive regular floating-rate interest payments
- Event Monitoring: The fund actively tracks potential trigger events worldwide
- Maturity/Loss: Bonds either mature with return of principal or trigger with partial/full principal loss after a qualifying natural disaster event
Who Should Consider ILS?
Institutional investors seeking portfolio diversification and non-correlated returns
Financial advisors looking to enhance client portfolios with alternative investments
Individual investors interested in high-yield alternatives to traditional fixed income
Income-focused portfolios requiring protection against interest rate and inflation risks
Experienced Management
The Brookmont Catastrophic Bond ETF combines the institutional expertise of Brookmont Capital Management with King Ridge Capital Advisors, delivering professional oversight of a complex asset class. Their active management approach includes:
- Proprietary risk assessment process
- Dynamic portfolio adjustments based on evolving climate and market conditions
- Balanced exposure across different perils and regions
- Institutional-grade catastrophe modeling and risk analysis